Energy Regulator Moves To Protect Fixed Rates
Energy suppliers have been banned from increasing their prices on fixed-rate deals, the industry regulator confirmed while announcing an £8.5m penalty against ScottishPower over misleading sales techniques.
News of the redress comes at a sensitive time for the big six energy firms which are under fire from customers over inflation-busting increases to bills ahead of winter while politicians scrap over intervention in the market.
To date, three of the firms have announced average rises of between 8% and 11% and today the Energy Committee of MPs added to the backlash by confirming it would be summoning the bosses of British Gas, Scottish Power, E.ON, EDF Energy, nPower and SSE to give evidence on the hikes to bills.
Amid accusations it had been slow to protect consumers, Ofgem said new rules were now in force meaning energy suppliers were banned from increasing prices on fixed-term tariffs over the course of a contract and banned from automatically rolling householders onto another fixed-term offer when their current one ended.
The regulator said it wanted to end loopholes in fixed rates, including fixed deals linked to standard tariffs, meaning they would rise as standard prices increased.
From December 31, firms will have to cut the number of tariffs they offer customer to just four for gas or electricity, while from March companies will have to show the cheapest tariff they offer on every customer's bill.
Andrew Wright, Ofgem's chief executive, said: "Ofgem is resetting the energy market in consumers' favour to make it simpler, clear and fairer.
"Today's extra protection for consumers on fixed prices is just one of a range of reforms we are bringing in over the next six months to hold energy companies to higher standards.
"If suppliers fail to deliver, then Ofgem stands ready to take enforcement action to protect consumers.
"In an era of rising prices it is vital that competition works as effectively as possible. Our reforms seek to give consumers the tools they need to find the best energy deal for them and to ensure that suppliers have to treat them fairly.
"Ofgem is going to make it easier for consumers to 'vote with their feet' and for new suppliers to enter the market and take on the big six.
"Now we are looking for energy suppliers to pick up the baton and put their efforts into restoring consumer trust.
"Encouragingly suppliers have shown a willingness to start on this journey by signing up to our reforms and are now acting to implement them."
Ofgem's action followed criticism from MPs and Labour which have accused the regulator in the past of failing in its duty to protect energy customers.
Energy and Climate Change Secretary Ed Davey said: "This is a clear, strong signal that energy companies shouldn't expect to get away with bad practice.
"We're giving Ofgem powers that force energy companies to make direct payments to consumers hurt by these kinds of activities, and backing up Ofgem's reforms so that consumers get a simpler, fairer deal."
Ofgem also confirmed on Monday a deal with ScottishPower to rectify previous mistakes.
The firm is to pay £7.5m to benefit vulnerable customers and establish a £1m customer compensation fund for breaching the terms of its market licence between October 2009 and January 2012.
Ofgem said ScottishPower provided customers with inaccurate estimations of annual charges and comparisons with their current supplier both on the doorstep and over the phone.
The settlement, the company said, meant that more than 140,000 people on the Warm Home Discount scheme would automatically receive payments of around £50 each.
ScottishPower said it would write to 336,000 households that may have been mis-sold but came under fire for estimating mis-selling compensation payments at between £5-£30 per affected customer.
Shadow energy secretary Caroline Flint said: "This is yet more evidence that Britain's energy market is broken.
"Yet again Ofgem's response has been weak and David Cameron refuses to stand up to the energy giants. These companies need to know that if they mistreat their customers there will be a heavy price to pay."
The company said it accepted the selling failings, but insisted it had now rectified the problems. It stopped door-to-door selling in 2011.
:: We want to hear from you - if you've signed up for a fixed tariff, only to find your bill has gone up, or if you've been a victim of mis-selling please get in touch. You can email your comments - or a video of yourself making them - to firstname.lastname@example.org.