Decision: Estimated Annual Cost for domestic consumers

Licence modification

Ofgem’s objective is for consumers to be provided with projections of the costs of their electricity and gas tariffs that are both transparent and accurate. This will enable them to budget and to compare and switch tariffs with confidence.

We have decided to amend the methodology that suppliers and some price comparison sites are required to follow when estimating consumers’ annual costs. The change will allow suppliers and comparison sites to come up with their own methodologies for estimating a consumer’s annual costs, where they are required to provide one, as long as the estimate:

  • Is personalised to the consumer, based on information that is reasonably available to the supplier or comparison site, and on reasonable assumptions where actual data is not available;
  • Is based on actual historic consumption wherever this is available (and a best estimate of consumption where it is not);
  •  Includes non-contingent discounts and non-optional bundled charges, and excludes contingent discounts and optional bundled charges;
  • Is applied consistently when used to provide the consumer with a comparison of different tariffs, such that the same assumptions, where relevant, are made for all tariffs that are being compared; and
  • Is transparent, and accompanied by a description of the estimate that makes clear to the consumer what it is, what it can be used for, and any assumptions that have been made in its calculation.

This change will ensure that the Estimated Annual Cost rules continue to provide strong protections for consumers while also being sufficiently flexible and future-proofed to reflect the tariffs that are on the market now and in future.

The Confidence Code has been updated to reflect these changes. The new Confidence Code document can be found in the subsidiary documents below.