Ofgem guidance on collective purchasing and switching schemes

1st May 2012.  Yesterday afternoon (30/4/2012) Ofgem wrote an open letter offering guidance on the legality of collective switching schemes. In general Ofgem “generally welcome” the development of collective purchasing schemes. In particular, schemes which place an emphasis on involving vulnerable or currently non engaged customers were singled out as being particularly welcome.  This is good for thePeoplesPower as we place a special emphasis on trying to help people switch their electricity or their main gas when they are at risk of or suffering from fuel poverty (see our work with Housing Associations)

Ofgem’s General conclusions

All quotes on this page can be found in the Ofem Open letter on their website http://www.ofgem.gov.uk/Markets/RetMkts/Compet/Documents1/collective%20switching%20open%20letter.pdf (PDF file)

“Our general view is that the licence conditions that apply to licensed suppliers do not, in principle, prevent suppliers from engaging in collective purchasing and switching schemes.”

and

“Similarly, our general view is that the regulatory requirements under the RMR proposals would not prevent suppliers from engaging in collective purchasing and switching schemes.”

(RMR – is Ofgem’s Retail Market Review – a consultation that has just been completed by Ofgem with the energy industry on how domestic supply should be reformed.)

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Cautionary note for consumers

Ofgem did note that there are “potential risks for consumers” – we share that concern and have drafted comments to DECC on how collective electricity and gas switching should be promoted. in particular we pose the questions consumers should ask before they sign up to any switching scheme.

Collective Switching and Purchasing must comply with current standards of practice

These standards of conduct should apply to all energy suppliers’ dealings with domestic and small business customers and there will be no change with any collective switching scheme.  They have been “in force” since 2009 so your electricity and gas company should have been behaving in this manner.

  • You must not sell a customer a product or service that he or she does not fully understand or that is inappropriate for their needs and circumstances;
  • You must not change anything material about a customer’s product or service without clearly explaining to him or her why;
  • You must not prevent a customer from switching product or supplier without good reason;
  • You must not offer products that are unnecessarily complex or confusing;
  • and You must make it easy for customers to contact you and act promptly and courteously to put things right when you make a mistake.

With these codes of conduct in place since 2009, it is hard to understand how we have a situation where there are so many complex tariffs and bills.  (Though it should be noted that in anticipation of market reform there has been a reduction in the number of tariffs some of the big six suppliers offer.  It is also worth noting that many of the smaller suppliers offer a very limited number of simple tariffs – this is one of the reasons we have constructed our switch to try and ensure small suppliers will participate see how thePeoplesPower collective switching works)

“Consumers have told us that energy suppliers prices are too complicated. It is no surprise that they are bamboozled when tariff complexity has increased from 180 to more than 300 since 2008″ (Ofgem press release
28Maybe all those who find their energy bills and tariffs  “unnecessarily complex and confusing” or do not “fully understand” your gas  or electricity bill are the “stupid people” Martin Lewis of Money Savings Expert fame wrote about last year in his blog? – A blog in support of stupid people (opens in a new window).

The details

The advise is in an open letter on Ofgem’s site see – http://www.ofgem.gov.uk/Markets/RetMkts/Compet/Documents1/collective%20switching%20open%20letter.pdf (PDF file)

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