- Publication date
- 3rd July 2017
- Information types
- Policy areas
- Ofgem announces plans to protect vulnerable consumers, including option of safeguard tariff
- New reforms to take the hassle out of switching and make it easier to get a better deal
- Proposals to cap warrant charges to install pre-payment meters and ban these charges altogether for the most vulnerable
Ofgem is announcing plans to protect vulnerable consumers as part of a wider programme to make sure all consumers get a better energy deal.
Options being considered include introducing a safeguard tariff for vulnerable consumers which would protect them from overpaying for their energy.
Research from Ofgem and the findings of the Competition and Markets Authority investigation point to vulnerable consumers in particular getting a poor deal.
As we move towards a smarter, more competitive energy market, Ofgem is committed to ensuring that vulnerable consumers in society are not left behind.
For consumers more able to engage in the energy market, Ofgem is taking action to take the hassle out of switching. While the number of switches is at a nine year high, according to Ofgem’s latest data3, many people think it’s too much hassle and have never or rarely switched.
- Ofgem is changing the rules for price comparison websites4 to make it easier for people to switch to cheaper deals. Currently, users can’t switch directly to some of the cheapest deals listed and have to visit the supplier’s own website and re-enter their details. Ofgem’s rule change will give customers better access to cheaper deals, allowing them to switch directly from a price comparison site. Consumers will still be able to see other deals that they cannot switch to directly by clicking a button on the comparison website, or by visiting the Citizens Advice website.
- Ofgem will also be trialling a new ‘Check Your Energy Deal’ online switching service5 to help customers who have been on poor value standard variable tariffs for three years or more to find cheaper deals. They will be able to see quickly how much they can save simply by entering their address including postcode and name of current supplier and the new service will make switching easy with a few clicks.
- In a separate trial6, Ofgem is testing whether writing to customers – including people who are vulnerable and not online - about cheaper offers from rivals prompts them to shop around and switch tariff.
Ofgem has also announced separate proposals8 to cap at £150 how much suppliers can charge customers for installing a pre-payment meter under warrant and to ban these charges altogether for the most vulnerable. Pre-payment meters are typically installed under warrant when a customer cannot or will not pay their energy bill.
Dermot Nolan, chief executive of Ofgem, said:
“Protecting vulnerable consumers is a priority for Ofgem. We are committed to ensuring that the more disadvantaged in society are not left behind as we move towards a smarter, more competitive energy market.
“That’s why we are starting new work to protect vulnerable customers, including the option of introducing a safeguard tariff for them.
“Suppliers must also do more to get all their consumers, particularly those on poor value standard variable tariffs, a better deal. We are pressing ahead with a raft of reforms to make it even easier for people to switch no matter how they choose to shop around.”
Notes to editors
- Ofgem has published its response to the letter written by Greg Clark, the Secretary of State, to Ofgem on June 21st about the retail energy market.
- Ofgem referred the energy market to the Competition and Markets Authority (CMA) in 2014. After a two-year investigation, the CMA’s final report published in June 2016 included remedies to help and encourage consumers to switch. The consumer engagement measures we have announced today are in response to these recommendations.
- For April 2017. See “switching and experience” section on Ofgem’s data portal
- Price comparison website rules decision: This rule applies to price comparison websites that are accredited to Ofgem’s voluntary ‘Confidence Code’ which requires them to meet standards of transparency and accuracy. In 2015 Ofgem made a change to the Code by requiring price comparison websites to show all deals by default, including those that you can’t switch to directly, unless the consumer makes an active choice to see a more limited selection. In 2016, the CMA recommended that this rule should be removed. The CMA found that this rule is making it more difficult to switch to a better deal which is borne out by Ofgem’s own research:
- Around 5 million people used price comparison websites to search for energy deals last year, but less than half of those people actually went on to switch.
- Ofgem estimates that almost nine out of ten people who searched using price comparison websites and switched did so on a click-through link last year. That means only a small minority completed a switch to a listing which they couldn’t click through to.
- People who search price comparison websites for home insurance are three times more likely to switch than people who search for energy (CMA 2017).
- “Check Your Energy Deal” trial: Ofgem is trialling an online switching service to help customers who have been on their suppliers’ expensive standard tariff for three years or more to find cheaper offers. The ‘Check Your Energy Deal’ service will know the tariff and consumption information of customers who are taking part in the trial which will make it easier for them to find a cheaper deal. Ofgem has selected the town of Northampton where up to 10,000 customers from one supplier will be invited to test the service from this September.
- Cheaper market offer trial: In a separate trial, customers will receive a tailored letter from their supplier or from Ofgem telling them about cheaper offers from rival companies.
- Personal projections working paper: Ofgem is planning on changing the way that personalised estimates of the annual cost of energy tariffs are calculated for customers to help them shop around and compare deals. The standardised method that suppliers and price comparison websites currently use may not work for some of the new tariffs and discounts and does not allow suppliers to tailor the estimates to different customer preferences. Ofgem will consult on how to make calculations of annual cost estimates more helpful for consumers.
- Statutory consultation on how we would implement final proposals on pre-payment meter warrant costs: Charges for installing meters under warrant can be as high as £1000 and include court costs and locksmith’s fees, which risks pushing consumers already struggling with debt into further financial stress. Ofgem’s consultation, launched in September 2016, seeks to protect indebted consumers who have meters installed under warrant from high charges and undue hardship. Proposals include capping charges at £150 for all consumers, banning charges for the most vulnerable, and in some cases prohibiting warrant installations entirely. The proposals also aim to make sure suppliers only install pre-payment meters under warrant as a last resort.
Further information for media
For further information, contact:
Tim Webb: 0207 901 7179
Ruth Somerville: 0207 901 7460
Media out of hours mobile: 07766 511470 (media calls only)
Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.