The ultimate guide to Ofgem
So, exactly what (or who) is Ofgem?
Ofgem stands for the Office of Gas and Electricity Markets, and it’s the ‘industry watchdog’ for the energy markets.
It’s an official government regulatory body. Like Ofsted, Ofcom, Ofwat, the Charity Commission, the Civil Aviation Authority and the Financial Conduct Authority (to name just 6 out of more than 60 of these bodies).
There used to be two separate gas and electricity regulators, but they were merged in 2000 to create Ofgem. This new, combined UK energy regulator was needed because of the opening up of the energy markets. Until 1996, almost all gas was provided by British Gas, while electricity came from the Central Electricity Generating Board (CEGB).
At first, Ofgem was responsible for setting maximum prices for gas and electricity, but the government took away these powers at the start of the 21st century. Energy companies now set their own prices, with the assumption that, as they’re competing with each other, they’ll have to keep prices low. However, since Ofgem lost this control, energy prices have risen by around 160% .
What does Ofgem do?
Ofgem’s main duties are to protect your interests, promote fair competition and ensure the supply of gas and electricity is secure. They also set price controls and encourage energy suppliers to minimise their impact on the environment.
They regulate all the companies that operate and maintain the pipes and wires that carry gas and electricity across the UK and into your home.
They collect information about energy suppliers’ performance, and keep a record of all complaints, as well as keeping tabs on how many complaints are made about each individual energy company. All suppliers now have to publish domestic complaints figures on their websites.
They make sure energy companies meet their ‘social obligations’. That means:
- Checking that each supplier offers a range of payment methods.
- Keeping an eye on the amount of debt owed by each company’s customers, the number of customers that get disconnected and the number of prepayment customers on its books.
- Making sure energy providers do their bit to help vulnerable customers.
- Checking that low-income families get support for energy-saving upgrades.
- Helping suppliers to reduce their greenhouse gas emissions.
- Ensuring energy companies comply with the Energy Companies’ Obligation and offer the Renewable Heat Incentive and Warm Home Discount.
What was Ofgem’s Retail Market Review?
In June 2013, Ofgem published the Retail Market Review (RMR), a review of the energy market, designed to find out whether energy providers were really putting consumers’ interests first. The review found that:
- Many companies were offering a tangled web of different rates and tariffs, and often a selection of rates within a single tariff. This confused customers and made it hard for them to make a properly informed decision about which supplier was offering the best rates.
- Many tariffs were only available for new customers.
- Companies were keeping longstanding customers on old tariffs that were no longer available to new customers and were poor value for money.
- Many customers had no idea which tariff they were on.
To improve the situation for consumers, Ofgem proposed a number of reforms that would encourage energy providers to offer simpler choices, clearer information and fairer treatment for consumers. They recommended that:
- Energy providers should stop offering any tariff that included a range of different rates.
- All tariffs should simply have one standing charge and one unit rate. The only exceptions were Economy 7 and Economy 10, white meters and Heatwise tariffs, as these all offer cheaper rates during off-peak hours.
- Each supplier should offer a maximum of four core tariffs.
- All energy bills should include a box of key information about the customer’s tariff, so that the customer could compare it with other companies’ tariffs if they were thinking about switching providers.
- All energy companies should tell customers if they could transfer to a cheaper deal without switching to a new provider.
How can Ofgem help me?
According to Ofgem’s website, their priority is to ‘make a positive difference for consumers’.
They keep an eye on the big energy companies, to stop them using their size and strength to take advantage of consumers. So Ofgem is helping you by making sure energy companies offer you value for money and a fair deal.
If you’re vulnerable for any reason (such as age, illness, disability or poverty), Ofgem helps to make sure the energy companies take special measures to help and protect you.
They’ve also made it easier for energy customers to switch providers. If you’re planning to switch, it’s thanks to Ofgem that you can find accurate, independent data and simple tariff information to help you make the best decision.
This is because Ofgem is responsible for the Confidence Code, which regulates energy price comparison sites. It makes sure they act independently and give you fair, unbiased information based purely on facts and figures.
On Ofgem’s website, you can download a range of energy ‘How to’ guides, including ‘How to switch supplier’, ‘How to complain’, and ‘How to get an electricity connection’.
How effective is Ofgem?
Ofgem may be a watchdog, but is it a watchdog with teeth?
As a gas and electric regulator, it probably isn’t as effective as it would like to be, but things could be much worse for consumers if Ofgem didn’t exist. It has penalised energy providers for mis-selling their energy plans, both door to door and over the phone, including fining one of the ‘big six’ a whopping £10.5 million for mis-selling.
Recently, Ofgem has turned its attention to the regional distribution network operators (DNOs), the operations that carry electricity from the National Grid to your home. These companies currently have a stranglehold on the £500 million market that connects electricity to homes and businesses.
In October 2015, Ofgem brought in new rules and a new code of practice, to enable independent firms to take on the big boys and compete for new business.
From now on, DNOs will have to cut down the number of services that only they can provide. If they have no choice but to provide them, they’ll have to make sure they’re being fair to their competitors. That includes being more willing (and acting faster) to share technical information.
Ofgem has also demanded ‘consumer redress’ powers so that they can take stronger action against companies that breach the terms of their licence. The government supports this, and has included these new powers in the Energy Bill.
How can I get in touch with Ofgem?
The easiest way to contact Ofgem is through their website. They have a range of phone numbers according to your reason for contacting them, so once again start with the website to find the Ofgem phone number you want.