Suppliers face different costs for the energy payment methods they provide.
OFGEM have a strong track record in clamping down on unjustified price differences between these payment methods. Their energy supply probe resulted in more than £300 million in unjustified price differences being removed, including those related to customers using pre-pay meters.
OFGEM introduced a rule which stops suppliers charging more for one payment method compared with another, unless it can be justified by cost. If they find evidence that suppliers are not complying with this rule they take action. They are investigating Scottish Powerís compliance with this licence condition.
OFGEM will also be collecting further information on suppliersí approaches to setting price differences between payment methods as part of the first Competition Assessment that they are carrying out with the OFT and the Competition and Markets Authority (CMA).
As part of their reforms for a simpler, clearer, fairer market suppliers will have to tell all customers what their cheapest tariff is on all bills and other communications from 31 March, including if they change payment method.
Suppliers should therefore be open with consumers about why these price differences exist, and explain where consumers could make savings by switching payment method. Given public concern over these differences OFGEM urge suppliers to also look at how they can provide more reassurance to consumers that they are being set fairly.
Consumers are already seeing simpler tariff choices as a result of their reforms and switching rates at the end of 2013 were the highest ever, which has already made it easier to find the best deals available across the market.
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