Ofgem aim to simplify market

Published on Thursday, 01 December 2011 11:13
Posted by Scott Buckler

Ofgem today published its proposals for a simpler, more competitive energy market for householders, including plans for tariff simplification announced in October

Ofgem‟s tariff proposals include a no frills tariff with a single standing charge set by Ofgem and a simple unit price. Alongside this will be 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 per cent 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 per cent 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 per cent of consumers tested said they would be more likely to switch if tariffs were made simpler.
Consumer research shows that consumers are disillusioned and therefore Ofgem considers that only a radical break with the past will restore consumers‟ confidence in suppliers. There is also increasing recognition from energy suppliers that such a change is needed.

Ofgem‟s Chief Executive Alistair Buchanan said:”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 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.”


Restoring consumers‟ confidence in the energy market is also vital at a time when high global energy prices and the need to invest £200 billion to secure supplies and achieve carbon targets is putting pressure on consumers‟ bills.

Along with simpler tariffs, Ofgem is proposing clearer bills and information and enforceable standards of conduct. Ofgem will be publishing its plans to increase liquidity in the wholesale electricity market and will be publishing the findings of an independent review of suppliers‟ accounts in the New Year.


*Ofgem’s quantitative research looked at how consumers would behave when faced with a standing charge set by Ofgem, a single unit rate and comparison information in pounds and pence. All of these features are part of Ofgem’s proposed reforms for the retail market. See notes to editors 1 for more information.

 

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