? Ofgem wants single tariff and no tie-ins for consumers
? Watchdog wants suppliers to sell a fifth of generating capacity
? Evidence companies put up bills quicker than they cut them in response to costs
Britain's electricity and gas suppliers have been ordered to reform their pricing and stop confusing customers, or face a formal referral to the Competition Commission.
In a damning verdict on the UK energy market, industry regulator Ofgem said consumers are being "bamboozled", with more than 300 different energy tariffs now available. It pledged to "sweep away this complexity", so that households can easily compare prices and pick a good deal.
The UK's Big Six suppliers have just two months to accept wide-ranging reforms that will prevent them from continuing to fail customers, Ofgem warned.
The regulator wants suppliers to sell off up to a fifth of their electricity generation capacity to inject much-needed competition into the industry. It also said that, for the first time, there was clear evidence that energy firms have adjusted their prices in response to rising costs more quickly than they reduced them when costs fell.
"Ofgem's proposals should force open the electricity and gas markets to ensure the market works effectively for consumers," said Ofgem's chairman, Lord Mogg. "The energy supply companies have eight weeks in which to engage constructively with Ofgem's proposals. If firms frustrate reforms they risk ending up at the Competition Commission. This is a holistic package of changes."
The proposals were backed by energy secretary Chris Huhne, who welcomed the drive to simplify tariffs.
"Consumers deserve the best possible deal, which means rough and tough competition in the marketplace," said Huhne.
Scott Byrom, energy manager at moneysupermarket.com, was pleased that Ofgem was "finally" taking decisive action to protect bill payers.
"For years there has been speculation the speed price increases hit consumers is far quicker than the rate price decreases are passed on and OFGEM is finally looking to stop this unfair practice which sees bill payers left severely out of pocket," Byrom said.
Disappointingly poor progress
Three years ago, Ofgem conducted a probe into the energy market, which resulted in new measures that were meant to improve competition. It admitted on Monday that the industry's response to the 2008 investigation had been "disappointingly poor". It now wants to tighten licence conditions, so that suppliers comply with the spirit, as well as the letter, of the law.
"Consumers must have confidence that energy companies are playing fair at a time when they are being asked to foot the �200bn bill to pay for the investment Britain needs to ensure secure and sustainable energy supplies," said Ofgem's chief executive, Alistair Buchanan.
Britain's electricity and gas market was fully deregulated in the late 1990s, giving consumers the ability to take their energy from a range of suppliers. More than a decade on, though, the landscape is dominated by six companies ? British Gas, EDF Energy, E.ON, Npower, Scottish and Southern Energy and Scottish Power.
According to Ofgem, these companies reap higher profits from customers who take both electricity and gas ? the "dual-fuel" option ? from the company which supplied them before deregulation. It hopes that forcing companies to auction off some of their generation capacity will help new firms to enter the market.
On pricing, Ofgem proposes that suppliers would only be allowed to offer one single domestic tariff for each payment method, for so-called "evergreen" products which do not tie consumers into a fixed-term. This would make it easy to compare the suppliers' "per unit" price.
The regulator also announced that it has launched an investigation into Scottish Power over the differential between the cost of its standard credit dual fuel product, and the direct debit alternative. It is already investigating how British Gas, EDF Energy and Npower deal with consumers' complaints, and is also conducting a separate probe into allegations of mis-selling by EDF Energy, Npower, Scottish Power, and Scottish and Southern Energy.
Ofgem's proposals will now enter a consultation period, which will close on 1 June 2011.
Source: http://www.guardian.co.uk/business/2011/mar/21/gas-electricity-firms-told-simplify-prices
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