- Publication date
- 27th August 2013
- Information types
- Policy areas
- Ofgem’s biggest reforms of the energy retail market since competition began are now coming into force
- Standards of Conduct, backed by fines if necessary, require suppliers to treat their customers fairly
- Consumers can expect all their dealings with energy suppliers to be carried out in an honest, transparent and jargon-free way
- Ofgem has today issued directions to suppliers to implement the rest of its reform package meaning simpler tariffs are due in place by the end of the year
From this week rigorous new standards of conduct come into force that will ensure energy suppliers are treating consumers fairly.
The introduction of these new enforceable rules is the first stage of Ofgem’s reforms to make the energy market simpler, clearer and fairer.
The standards of conduct cover all interactions household suppliers have with consumers, from when they are marketing energy deals to them, to making amends when customers make a complaint about any aspect of their energy supply.
Suppliers will have to carry out all these actions in an honest, transparent and professional manner. They must make sure that any information given to consumers is clear, easy to understand and written in jargon-free language.
Suppliers must take into account customers’ needs in all their dealings with them. And they will have to publish statements each year clearly showing what actions they are taking to treat consumers fairly.
Andrew Wright, Ofgem’s Chief Executive, said: “Suppliers have already taken some steps to make the energy market simpler for customers and we welcome that, but our package of reforms means they must go further. The standards of conduct we have introduced require suppliers to go through a culture change in the way they treat consumers.
“They have to make sure they are embedding simplicity, clarity and fairness into all their dealings with consumers to tackle the lack of trust that has blighted the market. The standards of conduct will also enhance consumer protection as they are backed by Ofgem’s power to levy fines.” *
The onus will be on suppliers to embed fair treatment of consumers in every level of their organisation. Any brokers or third party intermediaries that represent suppliers will also be bound by the standards of conduct.
The standards of conduct are the first part of Ofgem’s reforms to come into place under the biggest shake up of the retail energy market since competition was introduced. Ofgem has also today published its final decision on implementing the rest of its reforms. This means that provided there are no appeals against the decision, the main reforms to tariffs, including the restriction on suppliers offering no more than four core tariffs per fuel, will be in place before the end of the year.
Following the main reforms to tariffs the rules to give customers clearer information, including the requirement that suppliers put details of their cheapest offers, which are personalised for individual consumers, on all bills and annual statements will come into force at the end of March 2014. (See notes to editors for further information)
Notes to Editors:
1. Ofgem is today issuing directions to change energy suppliers’ licences so that the rest of the retail market reforms, in addition to the standards of conduct can be implemented. Ofgem is obliged to allow a 56 calendar day period before the reforms take effect. Licence holders (including suppliers), trade bodies representing licence holders and Consumer Futures now have 20 working days to decide whether they should appeal against the reforms to the Competition Commission. If an appeal is not lodged, the rest of the package can start to take effect from 22 October 2013. Given the magnitude of the reforms, implementation will take effect in phases to allow time for suppliers’ systems to be fully geared up to deliver the changes.
2. Standards of Conduct
The standards of conduct came into force on Monday, 26 August 2013. They require suppliers and any organisations that represent them, such as brokers or third party intermediaries, to ensure that each domestic customer is treated fairly. They cover three broad areas:
Behaviour: suppliers must behave and carry out any actions in a fair, honest, transparent, appropriate and professional manner.
Information: suppliers must provide information (whether in writing or orally) which is:
- complete, accurate and not misleading (in terms of the information provided or omitted);
- communicated in plain and intelligible language;
- relates to products or services that are appropriate to the customer to whom it is directed; and
- fair both in terms of its content and in terms of how it is presented (with more important information being given appropriate prominence).
Process: the supplier must:
- make it easy for the consumer to contact them;
- act promptly and courteously to put things right when they make a mistake; and
- otherwise ensure that customer service arrangements and processes are complete, thorough, fit for purpose and transparent.
3. The other elements of the package which Ofgem has decided to introduce are set out below.
Simpler – making it easier to compare suppliers
By the end of December 2013:
- Suppliers will be limited to offering up to four “core” tariffs per fuel (electricity and gas). This will apply to each payment type. Suppliers will be allowed to offer these tariffs to collective switching schemes. They will also be able to offer extra fixed term tariffs into schemes that meet our criteria.
- All tariffs will have a standing charge and a single unit rate. Suppliers can set the standing charge at zero if they wish and some are doing this.
- Dual fuel and online account management discounts will remain. They will not be considered as “core tariffs” but as a discount. They will be simplified and will apply uniformly across all tariffs as £/pence per year. For example, a supplier would be able to offer a direct debit customer a choice of no more than four electricity and four gas tariffs. The customer could then choose a dual fuel discount and an online account management discount.
By 30th June 2014:
- All customers on existing, expensive “dead tariffs” (i.e. tariffs that are no longer marketed) must be transferred onto the cheapest variable rate. A supplier will only be able to keep consumers on “dead tariffs if they are cheaper, or as cheap, as the supplier’s lowest standard or evergreen tariff.
Clearer – introducing new tools to help switching
From 22 October 2013
- Suppliers will be banned from increasing prices on fixed term deals or making other changes to fixed term tariffs (except trackers or structured price increases set out in advance which are fully in line with consumer protection law).
- Suppliers will also be banned from rolling forward household customers onto fixed term contracts without their consent.
- Customers will be given a 42-49 day window before the end date of their fixed term tariff to decide if they want to stay with the supplier or switch.
By the end of March 2014:
- Suppliers will be required 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.
- New rules will be in place requiring all information suppliers send to consumers to be simplified, more engaging and personalised to them.
- Suppliers will use a new Tariff Comparison Rate (TCR), in all their communications to provide “at a glance” information to help customers compare tariffs. The TCR will be similar to the APR comparison rate used with credit cards. Ofgem is also requiring suppliers to provide personalised estimates which take account of a customer’s usage to enable them to compare tariffs more accurately when switching.
- A new tariff information label will set out key terms and conditions as well as relevant information to help consumers compare across suppliers.
Ofgem is also looking at ways in which the “stickiest” and most vulnerable consumers can be given better information on the cheapest deal across the market.
4. Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.
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