Ofgem has confirmed that it will implement the Competition and Market Authority’s recommendation to remove the ‘whole of market’ requirement from its Confidence Code.
The decision means that price comparison websites (PCWs) will no longer be obliged to show every energy tariff available on the market.
Ofgem said the aim of the Confidence Code, a voluntary code of practice for PCWs, was to help consumers feel confident they are receiving an independent, transparent, accurate and reliable service when using an accredited site to switch energy suppliers.
However following an energy market investigation conducted in 2016, the CMA determined that this requirement reduces any incentive for PCWs to compete with each other, therefore reducing the incentive to reduce commissions and win customers.
In the summary of its final energy investigation report, the CMA said: “Third party intermediaries (TPIs) such as PCWs can significantly reduce search and switching costs for domestic customers by providing an easy means to gain personalised quotes, on a comparable basis, from a range of different suppliers.
“However, we have found that customers on low income and with low levels of education are less likely to use PCWs. Of those who are not confident using a PCW, 43 per cent said they did not trust or believe PCWs.”
The report also looked at the impact of Retail Market Review (RMR) rules, which Ofgem implemented in 2010 amid concerns that retail energy markets were not working effectively for customers.
It added: “A further area where the impact of the RMR rules appears to be harmful to price competition is in relation to PCWs. The RMR rules stop PCWs from negotiating cheaper exclusive tariffs with retail energy suppliers (possibly in exchange for lower commission rates), or offering discounts or cashback offers funded by the commissions they receive from suppliers.
“The RMR rules therefore limit the pressure competition between PCWs to attract customers could put on energy prices.”
On Monday (July 16) Ofgem published new rules for its voluntary accreditation scheme for energy PCWs.
PCWs will now be able to omit a Wide Results page but are required to display a “prominent, clear and intelligible link” to the Citizens Advice Comparison Tool to ensure consumers who wish to see a wider range of tariffs are still able to do so.
Anthony Pygram, director, consumers and markets, Ofgem, said: “Following the decision to implement the CMA’s recommendation, all accredited PCWs now have the option of exclusively showing deals that consumers can switch to directly through their website provided they display a link to the Citizens Advice Comparison Tool.
“In addition, all testing obligations placed on accredited PCWs have been removed. A review of consultation responses and evidence gathered indicate that this change in the Code will help achieve the benefits of removing the WoM requirement whilst mitigating against the risks.”
Ofgem will review the impact of the Code change after it has been in place for at least a year.