UK Ofgem stops short of lowest tariff ruling

LONDON (Reuters) - Britain's energy regulator Ofgem stopped short of forcing energy suppliers to give their cheapest tariff, a political hot potato, in measures to simplify domestic gas and electricity bills on Friday.

The Ofgem proposals follow a review of the household energy market that identified tariff complexity, poor supplier behaviour and a lack of transparency and competition in a market dominated by six gas and electricity utilities.

Prime Minister David Cameron took the sector by surprise on Wednesday when he said that Britain would introduce laws to make energy suppliers give customers the lowest tariffs amid frustration over rising consumer bills.

Energy Minister John Hayes later backtracked on Cameron's pledge and said the government was only considering introducing such a law.

Ofgem's decision to omit such measures likely reflects the risks and difficulties of implementation.

The prime minister's announcement raised fears that it would actually disadvantage consumers as suppliers would react by simply withdrawing their lowest tariffs from the market.

Instead, Ofgem said it was consulting on banning complex multi-tier tariffs, making all tariffs show a standing charge and single unit price, and limiting the number of tariffs each supplier was allowed to offer.

The proposals would also force suppliers to print their cheapest tariff on consumers' bills, fair treatment would be enforced by the threat of fines and the regulator would take steps to promote collective switching.

"Ofgem is determined to press forward with proposals to deliver for consumers the most far-reaching shakeup of the retail energy market since competition was introduced," Ofgem Chief Executive Alistair Buchanan said.

Energy UK, Britain's energy industry association, backed Ofgem's proposals for setting the record straight after uncertainty following Cameron's remarks.

"As Ofgem's proposals and the Energy Bill are debated, clarity of plans and certainty of proposals will be essential, as well as open consultation and decision-making that is grounded in facts and evidence," Angela Knight, Energy UK's chief executive said.

"Investors will require confidence in our policy and regulations if we are to attract to Britain the ?150 billion of investment in energy that is needed in the next decade, to boost economic growth and add to the 600,000 already employed in the sector," Knight added.

Others interpreted Ofgem's stance as edging closer to the proposal made by the prime minister.

"The default to cheapest tariffs at the end of fixed-term contracts even goes some way to fulfilling the Prime Minister's off-the-cuff pledge to ensure customers get the lowest tariffs," Liberium Capital said in a research note.

Britain's six dominant energy suppliers, Centrica, Germany's RWE, and E.ON, Scottish Power IBESP.UL, SSE and France's EDF, will eventually be obliged to comply with the regulator's proposals.

(Reporting by Oleg Vukmanovic and Paul Sandle; Editing by William Hardy)

Source: http://news.yahoo.com/britains-ofgem-create-fairer-energy-market-062647870--finance.html

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