Cuts to energy tariff premiums and clearer bills

Ofgem has published a report showing that its regulatory reforms to the energy market introduced following its supply market probe are benefiting consumers. A key reform is already delivering significant benefits to consumers by cutting unjustified price premiums.

Also as part of the probe package, from today (1 July) energy customers will start to receive improved bills and annual statements explaining how much energy they have used and what it costs them.

Average premiums for prepayment meters compared with direct debit have dropped from £111 to £69 (-38 per cent). And the difference between the price an electricity supplier charges in its former monopoly area compared with the price it charges elsewhere in the country has dropped from £30 to £18 (-40 per cent) per customer per year. The reform has also reduced the unjustified premium that was being charged to around 4.3 million electricity only customers, often in rural areas, who couldn't get cheaper dual fuel deals simply because they are not connected to gas networks.

However, Ofgem's monitoring of the effectiveness of these regulatory reforms has also uncovered evidence that some suppliers may still be charging customers an unjustified price premium. Ofgem has demanded explanations from two suppliers under the first stages of a process which can lead to enforcement action if it isn't satisfied with the response. In addition, Ofgem has warned all suppliers to be transparent when marketing online deals particularly when temporary discounts are offered.

Sarah Harrison, Senior Partner, Sustainable Development, Ofgem, said: "The report is encouraging news for a lot of customers as unjustified price premiums have fallen significantly. However we do have concerns over some premiums and have made it clear to the two suppliers concerned that we will take action if the differentials cannot be justified.

"We want customers to have a much better picture of their energy consumption and how much they are spending. Clearer bills and annual statements will put all this information at their fingertips so they can compare energy deals more easily when they are thinking of switching."

Ofgem has also published the results of a survey showing that customers are still unhappy with certain aspects of the way suppliers handle complaints. Ofgem has decided to investigate the practices of suppliers to see if regulations for dealing with complaints are being breached.