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Ban on complex tariffs will simplify energy market – Ofgem

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A ban on complex energy tariffs has come into force today as part of Ofgem’s reforms to ‘restore consumer confidence’.

The energy regulator has said the ban will mean energy firms will no longer be allowed to offer complex tariffs, for example where consumers are initially charged a higher rate, which falls the more they use.

The reforms also mean that once a consumer has decided how they want to pay for energy they will have just four tariffs to choose from for gas and four for electricity, from each supplier. Together these changes will make it far easier for consumers to compare deals and find the best tariff for them, Ofgem has said.

From April 2014 a range of reforms are also coming into force to give consumers much clearer information on energy. For example, suppliers will have to tell consumers regularly in writing which of their tariffs is cheapest for them on bills, annual statements and other communications.

Under Ofgem’s reforms suppliers must structure their tariffs using only a single unit rate and, if they choose, a standing charge. Some suppliers have tariffs with a zero or low standing charge, and if consumers consider these tariffs better suit their needs, the suppliers will be expected to keep offering them.

Andrew Wright, Ofgem chief executive, said: “It is getting easier for consumers to get a better energy deal and by April further help will arrive in the form of much clearer and personalised information.

“The aim of our simpler, clearer, fairer reforms is to ensure competition bears down hard on prices. Profits are not an entitlement, they should be earned by companies competing keenly to offer consumers the lowest prices and the best service.

“Now it is up to suppliers to build on our reforms to restore consumer confidence in the energy market. There are good signs that they are taking up this challenge.”

The ban on complex tariffs follows the introduction in October 2013 of Ofgem’s rules for fixed-term tariffs. These rules ban suppliers from increasing prices on fixed-term tariffs. Suppliers are also banned from automatically rolling householders on to another fixed-term offer when their current one ends.

These reforms are the biggest changes to the retail energy market since competition was introduced in the late 1990s.