From 22nd October 2013 new Ofgem rules came into force meaning energy suppliers are banned from increasing prices on fixed term tariffs. They are also banned from automatically rolling householders on to another fixed term offer when their current one ends. These new rules are the latest stage of Ofgem’s reforms to reset the energy market so that it is simpler, clearer and fairer for consumers. They are in addition to reforms, introduced in August that require suppliers to treat consumers fairly.
Ofgem is giving consumers more protection so they have the certainty that if they choose a fixed term deal, the price and conditions they sign-up to will not be altered. Consumers will not be rolled-over to a new fixed-term deal, but to a tariff which allows them to switch away without penalty. They will also get over 40 days warning that their fixed deal is coming to an end so they have plenty of opportunity to find the best deal for them.
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.”
- Fixed means fixed – consumers on fixed deals now get price certainty
- Automatic roll-overs now banned for householders on fixed deals
- Energy suppliers are now subject to Ofgem’s reforms and the next step will see simpler tariffs coming into force at the end of December
1. Fixed term contracts
- Suppliers will be banned from increasing prices, or making other changes to fixed term contracts which are to the disadvantage of a customer. The only exceptions to this are “tracker” tariffs that follow an independent index over which the supplier has no control, or structured price increases set out in advance which are fully in line with consumer protection law. This new rule applies to any contracts entered into on or after July 15 2013.
- Suppliers will be required to notify customers that their current fixed-term is coming to an end between 42 and 49 days before the contract ends.
- Between this notification period and the end of the fixed term contract, suppliers will be banned from charging a termination fee should the customer decide to switch.
- Suppliers will be banned from automatically rolling a customer over onto a further fixed term contract.
- Instead suppliers will be required to default customers to an evergreen contract if the customer takes no switching action before the end of their fixed-term contract (this default contract must be the cheapest evergreen tariff with the supplier from 31st March 2014).
2. All contracts
- If customers are told about a price rise and choose to switch then existing rules mean that the supplier cannot apply the higher price. We have made it simpler for customers to benefit from this “price protection window” as they will no longer have to notify their old supplier to benefit and keep their current prices until their new contract begins.