Ofgem Lays Down The Law To Energy Firms Over Confusing Price Tariffs

UK energy companies have been given a tough ultimatum by the country's energy regulator. OFGEM has stepped in to tackle the increasing problem of complicated electricity and gas tariffs and customers facing some of the highest energy bills in Europe.

Launching a vicious broadside against the 'Big Six' energy suppliers, OFGEM accuses them of 'bamboozling' consumers with overly complex tariffs in up to three hundred combinations of tariff rates. The confusion that rises from this complexity is in effect a shield against consumer rights and regulation the energy companies can hide behind while disguising what could be the cheapest and fairest deal for consumers.

It has now been confirmed that within the coming months, the top energy suppliers will be hit with a reform. The energy companies must now comply with the new rules. The OFGEM have also made it clear to the companies that they will do whatever it takes to ensure that UK consumers get a fair deal, and that the industry is brought back in line.

This strident attack on the industry has come following a long inquiry into pricing policy in the energy market, conducted in 2008. OFGEM has criticised the industry's response to the results of the pricing investigation as "disappointingly poor". Having given the industry plenty of opportunities to improve it practices, OFGEM has now decided to act decisively.

The government did try to intervene in the 90s, with the idea that if they increased competition then prices for gas and electricity would fall. It would seem, however, that this has had an opposite effect as prices are now spiralling out of control.

The government had high hopes that new energy suppliers would come into play, however there are still only six main suppliers with few other providers able to compete.

A new regulation which will aid customers is a single flat tariff requirement. Currently one company can offer dozens of different rates for gas and electricity, which most customers find confusing and perplexing. This has the effect of preventing them from gaining the best rates. From May onwards, OFGEM will require providers to have a single flat rate for gas or electricity. This will help the vast majority of customers to make easy comparisons between the energy suppliers.

Simplifying energy rate prices should give more power to consumers to hold the big six to account and if prices and the competition is clearer to see, then the hope is it will eventually lead to lower energy prices across the board.

One indirect and unintended side effect could be in the online price comparison market, an industry which has benefitted and grown off the confusion of the dizzying array of price tariffs available. How sites such as Moneysupermarket.com go from here will be interesting to observe.

Although it has taken three years since the price of energy was first being investigated, it seems that change is now inevitable and we will hopefully now see prices falling to a much more manageable level.