Response to Government's Annual Energy Statement

Publication date
31st October 2013
Information type
Policy area

Welcoming DECC’s Annual Energy Statement Ofgem’s Chief Executive Andrew Wright said:

“It has never been easier to choose a better energy deal as Ofgem’s reforms deliver a simpler, clearer and fairer market for consumers. Suppliers are cutting down the number of tariffs and their complexity ahead of our reforms, which limit them to four simple tariffs per fuel.

“Rules to ensure suppliers treat you fairly are already in place and further reforms are in hand to give clearer information, including putting your suppliers’ cheapest deal on your bill.

“In addition to this radical shake up of the energy market Ofgem will be leading an annual review on the health of the market with the OFT and CMA. We are also continuing to look at new ways to build on our transparency reforms to ensure the energy market is as open as possible.”

Ofgem’s work to make the market more competitive

  • Our rules to limit the number of tariffs suppliers can offer come into force at the end of this year. And we are bringing in further changes by end of March 2014 which will make energy simpler and fairer. These include the following reforms for consumers:
     
    • New rules requiring all information suppliers send to consumers to be simplified, more engaging and personalised to them. 
       
    • Requirements for suppliers to give all their customers personalised information on the cheapest tariff they offer for them. This information will appear on each bill and on a range of other customer communications.
       
    • Requirements for suppliers to give a comparison of old and new prices in a simple pounds and pence form when they inform customers of a price increase. This is to provide consumers with a clearer indication of the impact of a change in prices.
  • In Ofgem’s September response to the Energy and Climate Change Select Committee we confirmed plans to produce annual reviews looking at the health of the energy market.  We have invited the OFT and the new CMA to provide input and to support the development of a framework for competition assessment. We plan to set up a stakeholder working-group to assist in the development of metrics and welcome input now from all stakeholders.​​
     
  • Ofgem’s reforms for a simpler, clearer, and fairer energy market are an essential step towards a fundamental change to make the energy market work smarter for consumers.
     
  • Ofgem’s smarter markets programme is already looking at how to speed up the switching process including what can be done ahead of the introduction of smart meters. To this end Ofgem has been leading a detailed review of the switching process with government, industry and consumer bodies. We believe that industry could radically shorten the transfer process to a few days and we are challenging them to do this.
     
  • Ofgem has taken the lead in ensuring the energy market is as transparent as possible. Now that we are putting in place major changes to make the energy retail market simpler clearer and fairer we want customers to be confident that prices and profits reflect the costs suppliers face. So we are consulting on whether further steps can be made to make profits clearer.

We expect the companies to:

  • Complete full audits of their financial statements from the 2013 financial year onwards. This will provide a greater level of validation of the information they contain.
     
  • Publish their annual statements earlier, which will provide visibility of profits sooner after the period in which they were earned.

We also asking for views on other measures that could improve transparency of  energy company profits. These include

  • The companies publishing more information about their trading activities
     
  • Undertaking a review of transfer pricing methodologies used by the energy companies. This could provide a better understanding of the way in which the companies allocate revenues and costs between their generation and supply businesses.
  • We are on track to finalise our proposals shortly to establish a more level playing field so independent suppliers can compete effectively with the Big Six.  These proposals require the Big Six suppliers to post transparent prices for wholesale electricity up to two years ahead so smaller players can better hedge themselves in the market. We are also proposing rules ensuring that the Big Six suppliers and large electricity generators trade fairly with independent suppliers.
     
  • Ofgem continues to take a tough approach to enforcement. Since 2010 we have levied penalties and redress payments of over £70 million where the industry has broken rules set by Ofgem to protect consumers.

 

Ends 

For further press information contact:

Chris Lock: 020 7901 7225
Howard Rhoades: 0203 263 9629
Rory Edwards: 0207 901 7246
Out of hours: 07766 511470