Ofgem should shake up energy market

by Ed Bowsher on 24 September 2010  |  0 comments
Tweet

Too many people are getting a poor deal from their energy supplier.

I think the energy market needs a shake-up. Too many people are on a rotten deal and I think the regulator, Ofgem, could do more to help the consumer.

I've got four suggestions for regulatory change:

1. Suppliers should pay interest on money received via overpaid bills

Suppliers offer the best tariffs to customers who pay by direct debit. Direct debit customers often pay for more energy than they have used, and suppliers end up receiving what is effectively an interest-free loan from their customers.

Ofgem should force suppliers to follow the lead of Scottish Power and Ovo Energy and pay interest on credit balances. 

2. More competition for prepay meters

We estimate that up to five million households pay for energy using a prepay or ‘key’ meter. There’s very little competition in this market as the procedure for removing a meter is cumbersome and can cost between £90 and £120. Ofgem should foster competition by forcing suppliers to adopt a standardised and transparent process for removing a meter.

3. Cancellation fees should be banned on variable rate energy tariffs

On many tariffs, you’ll be hit by a cancellation fee if you switch to a different supplier within a year – or longer. Yet if you’re on a variable tariff, you could be hit by a price rise a few months after signing up. Then you have to decide whether to pay the cancellation fee (perhaps £75) in order to switch to a cheaper tariff.

4. Tariff discounts should be fully applied within three months of a deal

Tariffs are often quoted at a price that includes a discount. Yet on some tariffs, the discount isn’t applied until the customer has been using the tariff for a year or more. In reality, these supposed 'discounts' are cashback offers as the customer doesn't get the cash for a years. Energy suppliers should apply a discount by reducing the cost of energy on a monthly or quarterly basis.

It's time things were changed.