As energy prices in the UK and Europe continue to rise, many are seeking to cut costs by tackling the sometimes misleading and complex contracts offered by large energy suppliers.
Ofgem, the UK energy legislator, has been working hard in recent years to ensure that the general public and businesses alike get the best deal on their energy. Measures taken by the commission include tackling issues such as rollover contracts and cancellation fees, something that has recently prompted large companies like EDF Energy and Scottish Power to amend the way their contracts work for consumers.
This month Ofgem have produced a new set of rules for energy suppliers, in line with the first stage of their Retail Market Review (RMR), in the hope that in their words they will make the energy market “simpler, clearer and fairer” for the consumer. This new regulation aims to ensure that energy suppliers provide information to their customers that is clear and not misleading. Any brokers or other third party intermediaries will also be bound by this code of conduct.
These changes will be made in three areas: behaviour, information and process. This will have the following effect:
• Behaviour; suppliers must carry out their actions in a fair, honest, transparent and responsible manner.
• Information; energy suppliers will be required to provide written or oral information that is not misleading, and also plain and intelligible.
• Process; suppliers must make it easy for customers to get in contact with them, and deal with any issues quickly and courteously. All processes should also be complete and transparent in the eyes of the consumer.
Ofgem have stated to suppliers that these changes should come into effect by the end of the year to make gas and electricity tariffs simpler for consumers, and by the spring of 2014 they must also inform their customers of the cheapest deal available.
Industry commentators Which? have stated that these measures “do not go far enough” to tackle the issue of rising energy prices and transparency in the market. They propose radical changes should be instated by government to ensure that pricing is simpler still and that there is ring fencing of producers and suppliers to make sure there is a fair amount of competition in the market.
As a recent report into the energy market by Cornwall Energy has highlighted, many businesses still have faith in the measures that Which? have been quick to mark as ineffective. Around 71% of businesses in the UK believe that this legislation will improve the service provided by energy brokers. With 29% of micro-businesses not knowing the end date of their contract, and over 20% not understanding the auto renewal process and its effects, it is clear that more transparency is required.
Whilst it is clear that Ofgem’s regulation has had effects on energy suppliers in the market, helping those purchasing energy to understand their bills, it is as yet unforeseen as to whether these current changes will have the effect that is required to truly revolutionise the way they have conducted business in recent years. This is a concern that affects not just the UK, but is something that is being tackled by countries throughout Europe as well, in the hope that energy prices truly reflect the market.
This piece was written by Indigo Swan, who provide energy purchasing services to businesses in the UK.