Energy News

Ofgem to ban ‘unfair’ energy tariffs

Monday 23 March, 2009

By becca.talbot@consumerchoices.co.uk

Energy suppliers will be banned from charging customers “unjustified” prices under new rules proposed by energy regulator Ofgem.

Energy regulator Ofgem revealed a package of proposals to make sure that energy suppliers do not discriminate against certain customers by offering them bad deals with “unjustified price differences.”

Under Ofgem’s proposed rules, energy suppliers will have to charge customers prices that reflect their costs. For example, prices charged under different payment methods such as prepayment meters and direct debit must reflect the cost to the supplier of offering those payment methods.

Alistair Buchanan, chief executive of Ofgem, said this morning: “Our undue discrimination rule will address the symptoms of flaws in the market, while our retail market measures will treat the causes.” He added: “All consumers will be given greater power in the market.”

Ofgem launched an investigation in February 2008 into concerns that the “big six” energy suppliers were reducing choice and competition for customers by implementing similar price rises at the same time.

In October, the regulator said it would look into banning unfair price differences for vulnerable customers, but said the energy market “worked well” for most people and that it had failed to find evidence of the energy suppliers acting as a cartel.

Today Ofgem said it had found “flaws” in the retail market that meant some consumers were given unfair deals.

Under the proposed rules, suppliers will have to provide customers with annual statements showing how much energy they have used and reminding them of their right to switch to a cheaper tariff if they wish.

And tariffs will be made clearer to help customers compare energy prices.

Ofgem is also planning to regulate high-pressure doorstep selling, which will have to be followed up by a written statement from the energy supplier confirming that the offer made on the doorstep is better than their existing deal.

The regulator will consult with energy suppliers on the implementation of the proposed measures, and Ofgem will publish a consultation in April on its proposals.

Chris Eagle, commercial manager at EnergyChoices.co.uk said: “There have been concerns that prepayment customers, who are often among the poorer members of society, have been given worse deals by the energy suppliers. A ban on ‘unjustified pricing’ would ensure they were not discriminated against.”

“And the proposition of annual statements and a reminder that customers are free to switch is great news," he added. "You can save hundreds* of pounds on your energy bills by switching to a better deal. Compare energy prices today and see how much you can save.”

* Between 19 January 2009 and 19 March 2009 customers using our online comparison service saved an average of £158.67. The maximum saving was £1,941.

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