Ofgem announces 'radical' review of energy prices
March 21, 2011
Regulator Ofgem has told energy firms they must offer simpler tariffs to help consumers compare prices.
The "big six" suppliers should also face more competition, it said.
Ofgem said it would force these firms to auction off up to a fifth of the electricity they generate, making room for new companies.
Energy firms could be referred to the Competition Commission if they do not comply with the new system, Ofgem said.
The regulator said that customers were "bamboozled" by a complex system of tariffs, which have increased from 180 to more than 300 since 2008.
Competition in the UK energy market is being stifled through complicated tariffs and a lack of transparency, and energy firms "failed to play it straight with consumers", it said.
Ofgem launched a review of the energy market after claims were made that suppliers were making excessive profits.
Earlier in the year, British Gas said operating profits had risen by 24% in 2010 to £742m.
In November, Ofgem said that energy supplier's net profit margin per typical customer rose from £65 in September to £90 in November, a 38% rise.
Consumer confidence
Ofgem said it also found evidence that the "big six" energy firms "have adjusted prices in response to rising costs more quickly than they reduced them when costs fell".
"Consumers must have confidence that energy companies are playing fair at a time when they are being asked to foot the £200bn bill to pay for the investment Britain needs to ensure secure and sustainable energy supplies," said chief executive Alistair Buchanan in a statement.
One supplier, Scottish Power, will face an investigation into its pricing regime, Ofgem said.
That investigation is in addition to an ongoing Ofgem investigation into British Gas, EDF Energy and Npower and how they handle consumers' complaints.
Ofgem is also still investigating possible misselling by EDF Energy, Npower, Scottish Power, and Scottish and Southern Energy.
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