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Co-operative Energy responds to Ofgem consultation on retail market reform

Posted on 1 June 2011

Co-operative Energy today submitted its formal response to Ofgem’s consultation on possible measures to reform the retail energy market so that it works better for consumers.

There were four key Ofgem proposals:

  • Restricting suppliers to just one standard, evergreen tariff per payment method;
  • Prescribing the form and structure of that single evergreen tariff and in particular fixing the standing charge so that suppliers’ standard tariffs could be compared simply on their unit rates;
  • Opening up the wholesale markets so that they become more accessible to smaller new entrants;
  • Ancillary proposals to strengthen licence conditions and improve supplier conduct.

Co-operative Energy broadly welcomes the thrust of Ofgem’s proposals and certainly supports the aims of increasing consumer engagement in the industry but has reservations about some of the prescriptions proposed by Ofgem which Co-operative Energy believes could stifle innovation, restrict competition and thereby harm consumers.

For example, forcing suppliers to offer just one standard, evergreen tariff per payment method would make it easier for consumers to compare tariffs but could stifle innovation. We were also concerned about transition arrangements. Would consumers be transferred by default to each supplier’s new standard, evergreen tariff with or without the consumer’s consent?

We also took the opportunity to alert Ofgem to some of the more aggressive marketing practices used by the big suppliers when trying to dissuade a customer from switching away. For example, to encourage suppliers to be open and honest with their existing customers about their best available tariffs, we suggested that “win back” activity, in which suppliers offer one-off cash payments to departing customers to persuade them to stay, should not be allowed for a period of six months after a customer has left. This would increase the incentive for suppliers to offer their customers a consistently fair price rather than exploit customer inertia and respond only at the point a customer is leaving.

If you would like to receive a full copy of our response to Ofgem, please contact us at info@cooperativeenergy.coop but, be warned, it is a rather technical document.

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