Committee Chastise Ofgem for Energy Bills

The Commons Energy and Climate Change Committee have condemned the energy regulator Ofgem for allowing the big energy firms to charge excessive rates.

MPs have argued that the recently introduced price caps pertaining to the National Grid and other power distribution corporations, originally brought in to reduce the cost for distribution and transmission of electricity and gas, were excessive in their generosity to energy providers.

At present, network costs amount to just under 25% of a dual fuel bill and these costs are passed on to the consumers by the suppliers. Another criticism of Ofgem was that they had set their performance goals at a low level and the time it takes for consumers to discover whether Ofgem is helping them save cash is too long.

Tim Yeo, who is the chairman of the committee, stated: ìOfgemís chief executive told us that we would have to wait eight years to see whether value for money was being delivered for bill payers. This is too long for hard-pressed consumers to wait.î

ìOfgem must get its act together and scrutinise these near monopolies more effectively. Simpler charging methodologies are needed to strengthen the marketís ability to scrutinise costs and increase the pressure for greater cost-saving efficiencies.î

He went on to say: ìBarriers preventing smaller players from entering the market must be removed to drive down costs for consumers.î
This announcement comes after a recent report released by the Competition and Markets Authority informing the public that many are paying too much on their energy bills because of a failure to look around and switch suppliers or tariffs.

It found that customers loyal to big six companies- Scottish Power, British Gas, SSE, E.ON, EDF and Npower- are paying as much a £234 per annum more than those that are willing to search for better deals. Moreover, the average bill for a dual fuel deal is now priced at £1300 per annum.

Despite the committee members recognizing that the situation had improved since the new regulations were introduced, they argued that the revenue streams of network firms have been higher that they expected for the first year under the new rules.

Ofgem have responded by announcing their intention to prevent ìwhite labellingî by energy suppliers. The watchdog will implement new legislation from July 2015 which means that major energy providers are required to inform their consumers if the cheapest rates they provide are being advertised via a different branding scheme.

A spokesperson for the watchdog stated: ìOur regulation has delivered value for money. Britainís energy network is 17% cheaper in real terms than 25 years ago, £80 billion of investment has been secured and reliability has improved by 30%.î

They also emphasized: ìWe are in the process of implementing a number of the actions the report highlights, including introducing more completion to networks and looking to increase the notification period of network charges. Additionally, we estimate that our innovation stimulus will see companies realise around £900m of benefits to consumers in the next eight years.î

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