Ofgem betrays energy consumers by ditching the 28-day rule

Commenting on the decision Corin Vestey, the editor of Everyinvestor.co.uk, said, “This move by the regulator is a betrayal of consumers and of the principle of competition in the energy market.”

Energy regulator Ofgem announced on 01/08/07 that it no longer requires energy suppliers to allow their customers to cancel their contracts with just 28-days notice.

“Ofgem’s core responsibility as a regulator is to ensure that competition is maximised and the UK domestic energy market is thereby kept healthy. It is this competition that forces energy prices down and standards of service up for the millions of domestic energy consumers in the UK.”

Consumer protection sacrificed on the altar of sustainability

“The 28-day cancellation rule was the primary protection consumers had against uncompetitive practices by suppliers. Ofgem has abandoned its central responsibility to millions of energy customers.”

Ofgem claims that this move will “clear the way for energy suppliers to offer more innovative products that could bring better deals to customers and environmental benefits.”

This is a significant about-face from their position just four years ago. In a report submitted to the Energy Services Working Group in July 2003 (ESWG (03)6), which can be found here: berr.gov.uk/files/file20159.pdf Ofgem held up the 28-day rule as playing “an important role in protecting the UK’s 45 million domestic energy consumers.”

The 28-day rule “does not prevent” energy efficiency contracts
Ofgem’s report – Consumer protection in energy supply: the role of the 28-day rule – also describes the rule as “vital” and a “back door” allowing “consumers to extricate themselves from poor service or contracts...”

Furthermore, the 2003 Ofgem report states that the consumer protection afforded by the 28-day cancellation rule “does not prevent suppliers offering consumers long term contracts, or bundling energy efficiency measures with energy supply, and in reality some suppliers are currently offering fixed-term contracts.”

This is precisely the opposite of the claims put forward in Ofgem’s press release of last week.

Everyinvestor.co.uk believes that consumers are entitled to ask:

How Ofgem can abandon “vital” consumer protection it previously described as essential for “competitive dynamism” and “market liquidity” and still claim to be fit for purpose as an independent regulator?

Does Ofgem expect energy consumers to believe that suppliers will pay for energy efficiency measures from shareholders’ funds in order that their customers may use less of their product?

What does Ofgem see as the most likely result of the appearance of longer-term contracts, higher or lower prices for the consumer?

Is the scrapping of the 28-day rule simply a cynical way to stop the downward pressure on energy prices caused by competition and thereby force consumers to use less energy and hit climate change targets without, for example, raising VAT on energy use and incurring a direct political cost?

Will the effects of scrapping the 28-day rule fall hardest on the weakest in society?

Does Ofgem seriously think a very limited extension of free carbon monoxide monitoring to some families is adequate compensation for the wholesale destruction of fundamental consumer protection in the UK energy market?