Sarah is our insurance specialist, reporting the latest important developments in the industry.
The Office of the Gas and Electricity Markets (Ofgem) has announced today that it proposes a radical shift of the energy sector in the UK.
After reviewing the market, they concluded that the energy market is failing its customers and the complicated pricing system results in a monopoly amongst the Big Six leading energy suppliers.
The entire structure of the market has been looked at by Ofgem as they found that the behaviours of energy suppliers and overall operation of the industry were acting against consumer interest. According to their research,60 per cent of consumers are disengaged from the market.
Having reviewed the energy market, Ofgem has deemed the pricing system ‘unfair' and ‘complex'. Ofgem found that the Big Six energy suppliers altered prices in response to rising costs more quickly that reduced them when they fell in 2008.
Chief Executive Alistair Buchanan for Ofgem said, "Consumers have told us that energy suppliers' prices are too complicated. It is no surprise that they are bamboozled when tariff complexity has increased from 180 to more than 300 since 2008.”
Hoping to inject more competition into the market, Ofgem has also proposed a new licence condition meaning that the Big Six energy suppliers auction between 10 and 20 per cent of their electricity generation output. Ultimately increasing price transparency and making it easier for fresh competition to enter the market.
Commenting on the review, Mark Bower, Managing Director of MoneyMaxim.co.uk says,
"We welcome Ofgem's announcement that it is going to clean up the energy market. Our customers constantly comment on their distaste over what they see as ‘hidden traps' to snaring them into uncompetitive or inappropriate tariffs and now, thankfully, the regulators are starting to tackle the real issues consumers face.”
Today Ofgem have launched an investigation into Scottish Power's standard credit prices. They will continue to investigate British Gas, EDF Energy and npower on how they handle consumer complaints and investigations into misselling by EDF Energy, npower, Scottish Power, and Scottish and Southern Energy are also continuing.
Ofgem has given the energy suppliers 8 weeks to comply with the referrals and face a competition commission referral this year if they frustrate reforms. The energy suppliers have until 1st June to propose any alternatives and seek consultation.
Compare energy suppliers if you are unhappy with your current service.