With the recent news that Ofgem are steaming ahead with its proposals to reform the energy industry; many involved in its day-to-day operations back the initiative, yet struggle to see how the governing body plans to implement these necessary changes.

Ofgem have charged the ‘Big Six’* suppliers with giving away 20 percent of their energy production, whilst simplifying both commercial and domestic tariffs, to disperse the oligopolistic market, inviting competition and allowing new players to enter the industry.

The number of available tariffs has increased by over 110% in the previous 18 months, signaling significant confusion at both domestic and commercial levels. With this lack of transparency, it’s no coincidence that the number of businesses changing suppliers has dropped by over 20%.

In theory, Ofgem’s attempts to force suppliers to give away 20% of its electricity generated are a great idea, removing barriers to entry and increasing competition. Yet in practice, the power and sheer size of these organisation means that Ofgem have very little power. Not least because the UK government wants these big six to invest/subsidise (call it what you want) over £200billion in revamping the UK power generation operations. The minister has written to energy bosses, warning that the DECC (Department of Energy and Climate Change) would push through new legislation this autumn if necessary. Unfortunately, we don’t believe this likely to happen.

Ofgem’s CEO, Alistair Buchanan, has talked tough on energy suppliers before, using words phrases such as “failing to play it straight” and “bamboozling”. Unfortunately, last time there were little to no changes, and those that were implemented failed to have a significant impact on consumers’ confidence.

Unnecessary Price Rises?

All this comes as Scottish Power are being investigated for raising annual energy prices by 19% this autumn, whilst simultaneously running strategic marketing & PR campaigns to promote lavish and misleading deals. Torse’s advice: always read the small print (or of course consult your energy broker).

The real issue lies in the shareholders of these energy suppliers. Having experienced, and become accustomed to the high dividend payouts, executives across the UK are being put under excruciating pressure to gain year-on-year record profits, something which is simply unsustainable given the rise in wholesale costs and growing trend towards energy efficiency. The energy industry needs a clear, powerful voice that provides a solution to keep shareholders happy; whilst ensuring customers receive the best deals, in a clear and transparent manner. Torse looks forward to bringing you news of how Ofgem’s initiatives are progressing.

Notes:
Click here to view the full Ofgem Press Release.
*The ‘Big Six’ energy suppliers comprise of: British Gas, E.ON Energy, EDF Energy, Npower, Scottish and Southern Energy and Scottish Power.