Big Energy Firms Face Pricing Clampdown Article from: - skynews March 21, 2011
Gas and electricity suppliers have been accused of failing consumers by the regulator Ofgem which has proposed to sweep away "complex and unfair pricing practices".
After a review of the domestic energy market, Ofgem decided that complicated price tariffs and bad behaviour by suppliers have been stifling competition.
Ofgem chief executive Alistair Buchanan said: "Energy companies have failed to play it straight with consumers and so Ofgem is proposing to break the stranglehold the Big Six have over the electricity market.
"Consumers have told us that energy suppliers' prices are too complicated.
"It is no surprise that they are bamboozled when tariff complexity has increased from 180 to more than 300 since 2008.
"That is why we are planning to sweep away this complexity so suppliers' prices are fully exposed to allow easy price comparisons."
Chief Executive Alistair BuchananOfgem is proposing to break the stranglehold the Big Six have over the electricity market.
The Big Six are British Gas, e.on Energy, EDF Energy, Scottish Power, npower and Scottish & Southern Energy.
Ofgem said that, for the first time, it had evidence that the suppliers had pushed up prices in response to rising costs more quickly than they reduced them when costs fell.
It launched its review in November after it emerged that price increases had seen suppliers' profit margins soar by 38%.
The regulator has given them eight weeks to reform the way they operate or it will refer them to the Competition Commission.
To avoid referral, it has asked suppliers to comply with a series of proposed reforms beginning with less confusing tariffs to allow customers to compare prices more easily.
Major companies would also have to auction up to 20% of the energy they generate to other suppliers to stimulate competition in the market.
Scottish and Southern Energy (SSE) said the proposals represented "potentially radical changes" to the British energy market.
"While SSE believes the market is fundamentally sound, it will participate constructively in this next phase of review and consultation, the firm said.
Meanwhile, rival British Gas said it welcomed the move to "improve electricity market liquidity and transparency in the reporting of company returns".
Energy Secretary Chris Huhne added: "Consumers deserve the best possible deal, which means rough and tough competition in the marketplace."
The lobby group Consumer Focus claimed the structure of the energy market currently made it "nigh on impossible" for new companies to enter.
Chief Executive Mike O'Connor told Sky News: "Consumers have less confidence in energy companies than in any other sector - they feel that prices aren't fair, that tariffs are too complex and that the market doesn't treat them well."
"(Energy) companies are now on a very short leash. If they cannot show the will and capacity to change we would expect Ofgem to refer aspects of the markets to the Competition Commission."
Ofgem has also announced an investigation into whether Scottish Power charges unfair prices to customers who are not signed up to pay their bills by direct debit.
A Scottish Power spokesperson said: "We believe that our pricing is cost reflective and in accordance with Ofgem's Guidelines, but we will of course co-operate fully with Ofgem in the investigation and in reviewing their concerns."
Other investigations into the handling of complaints and mis-selling by other energy companies are continuing.
Video and Article http://news.sky.com/skynews/Article/201103115956854
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