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How are energy companies regulated?

By Rachel England Friday 21 February 2014

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Sometimes it seems as though consumers are at the mercy of energy companies – especially the bigger ones. But despite the stranglehold the Big Six has on the market, every energy company is subject to the same regulations. So even if they seem powerful and intimidating, they’re still liable for a serious telling off if they break the rules.

Energy companies are answerable to three main bodies:

ELEXON

ELEXON is responsible for making sure the wholesale energy market is well-balanced, and their role involves comparing how much energy generators say they’ll produce and how much suppliers said they will consume (by providing the energy to their customers), and how much is actually generated and supplied. Any energy that is created by generators in anticipation of demand by suppliers can’t be stored, so if it’s not used it’s wasted. ELEXON identifies any imbalances and charges suppliers accordingly.

Ofgem

Ofgem is the Office of Gas and Electricity Markets, a non-ministerial government department and National Regulatory Authority which is recognised by EU Directives. Ofgem’s main aim is to protect the interests of energy consumers, which it does by:

  • Promoting value for money
  • Promoting security of supply and sustainability
  • Supervising the development of energy markets and competition between energy companies
  • Regulating and delivering government energy schemes

Ofgem’s main role is to make energy companies work better for their customers, and to make sure suppliers uphold the requirements of their licenses. It doesn’t have a direct role dealing with individual consumers, but instead collects information from a range of sources, to make sure everyone’s playing ball.

Ofgem is in turn regulated by the Gas and Electricity Markets Authority (GEMA), which oversees Ofgem’s work and provides it with help and guidance in accordance with current energy law set down by government.

Consumer Futures

Previously Consumer Focus, and before that Energywatch – and soon to become part of the Citizens Advice Service – Consumer Futures is a watchdog for the gas and electricity industry, providing free and impartial advice on energy supplier issues and dealing with consumer complaints that cannot be solved by complaining directly to their supplier. Back in 2005, the organisation (then Energywatch) made a ‘super complaint’ to Ofgem about suppliers’ billing practices which resulted in tighter rules across the board for energy companies.

The rules

In addition to the many standards and regulations that energy companies must adhere to involving the way they manage their operations and the technical side of things (you can find those here), there are several consumer-facing codes and rules they must abide by, too.

  • Suppliers must ensure their customers receive fair, honest and professional treatment, in accordance with Ofgem standards of conduct. All information they provide must be accurate, they must be easily contactable, and if things go wrong they must be courteous and prompt in their response.
  • If you signed up to a fixed term deal on or after July 15th 2013, your supplier cannot increase the price.
  • You should receive a notice 42-49 days before the end of a fixed term tariff that lets you know your tariff is coming to an end. You cannot be automatically rolled onto another fixed tariff, and if you choose to stay with the supplier, you should be automatically rolled onto the cheapest standard tariff, unless you request otherwise.
  • Suppliers must tell you in advance of any price increases or contract changes that are a disadvantage to you.

From the end of March 2014, regulations will be in place to provide consumers with clearer information about their bills.

  • Suppliers must regularly tell their customers, in writing, which tariff is cheapest for them.
  • Suppliers must give consumers clearer bills, highlighting exactly how much energy they use.
  • Any price changes must be spelled out in terms of pounds and pence, so consumers know exactly how much more they will be paying.

 

Other important regulations include:

The Code of Practice for Accurate Bills

This code sets out what customers can expect from their supplier regarding their bills. There’s more here, but one of the most important clauses of the code states that customers are not liable to pay for energy used, but not billed for by the company (known as ‘back-billing’).

The EnergySure Code

This is a code of practice for the face-to-face marketing of energy services. Not all suppliers are signed up to it, but those that are must ensure that customers are given trustworthy advice and are not pressured into signing contracts. Any sales agent in breach of the code (more on it here) will no longer be allowed to work for the company.

 

For information on how to get independent advice about energy, see here.

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