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Ofgem announces new energy rules

Ofgem announces new energy rules

Category: Gas and electricity

Updated: 01/12/2011
First Published: 01/12/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Consumers will be given the option to take a 'no frills' energy tariff under new rules put forward by Ofgem.

Research by the regulator has found that the new plans are overwhelmingly backed by consumers.

Under the proposals – which Ofgem is calling on suppliers to implement as quickly as possible – customers will be offered a tariff with a single standing charge set by the regulator and a simple price-per-unit.

Consumer group Consumer Focus said the idea of a simple tariff with a common standard charge and easily comparable unit prices is a necessary step given 'the state of confusion in the market'.

Alongside its no frills option, energy firms will be able to provide more innovative tariffs with protection against price rises for the duration of the deal.

Consumer research suggests that consumers would find it much easier to compare tariffs under Ofgem's proposals.

Ofgem's quantitative research explored a range of options for presenting tariffs and found that 85% of consumers tested were able to identify the cheapest deal in less than half a minute when the standing charge is set by Ofgem, leaving just a single unit rate to compare.

This compares to only 44% of consumers tested being able to select the cheapest tariff under a simplified version of the current arrangements.

Ofgem's research found that over 70% of consumers tested said they would be more likely to switch if tariffs were made simpler.

Ofgem said the move represented a 'radical break' with the past which it hoped would stem customer disillusionment with the industry, adding that energy firms are increasingly recognising a need for change.

"Encouragingly, we are seeing that major energy companies like British Gas, E.on and SSE are recognising the problems that Ofgem has identified and there is a growing sense of consensus forming behind the need for a simpler, more competitive energy market," Ofgem's chief executive Alistair Buchanan said.

"Ofgem is now calling on all suppliers to back its reform programme, which gives energy suppliers a chance to draw a line under the past and an opportunity to restore consumer trust."

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