Energy suppliers should give 30 days notice of price rises
Energy suppliers will have to give consumers 30 calendar days warning before putting up energy prices under proposals by energy regulator Ofgem. The proposals are part of a raft of reforms Ofgem has introduced, following its energy probe, to ensure that the market works in consumers' interests.
A key theme of Ofgem's reforms has been to empower consumers with more information about how much they are paying for their energy. Already this autumn, Annual Energy Statements are landing on consumers' doormats, giving more detailed information on how much their energy will cost them in the next 12 months.
Ofgem advised companies when it carried out its Probe that giving consumers advance warning of price rises was best practice. At the moment companies have up to 65 days in which to notify consumers after they have put up energy prices. Consumers then have 20 days to switch supplier if they wish to avoid paying the price increase. Under Ofgem's proposals the position would be reversed, with companies required to give 30 days notice before they increase prices.
Other Ofgem reforms have seen the removal of unjustified price differences, benefitting the affected customers to the tune of around £500 million. The reforms also include more information on bills, tougher door-step selling regulations (the subject of a current Ofgem investigation), rules to make it easier for consumers in debt to switch, and requirements on companies to publish financial information on their supply businesses.
Ofgem's Senior Partner for Markets, Andrew Wright, said: "A month's notice of price increases, along with annual energy statements and better information on bills, will empower consumers by giving them the facts about how much their energy costs. This information makes it easier to shop around for a better energy deal and to evaluate the benefits energy efficiency measures can deliver.
"Companies should be under no illusions: we will continue to keep the effectiveness of the energy market under review and will not hesitate to bring forward further measures to protect consumers if the evidence shows them to be necessary. We intend to make sure that our current reforms stick, as our investigation of door-step selling demonstrates."
Ofgem will publish a consultation on its final policy proposals confirming that it is minded to propose licence modifications. Subject to responses to the consultation, Ofgem intends to proceed with a statutory consultation on amendments to the licence conditions which apply to domestic suppliers.
By law Ofgem has to consult on proposals for licence modification and the proposals can be blocked in a majority of suppliers object. If the proposals are blocked, Ofgem has the power to refer the matter to the Competition Commission. The Government has also indicated that if suppliers block the proposals it will consider taking action using its new powers under the Energy Act 2010. If suppliers do not block the proposals they could come into effect by January 2011.