by Mathew Beech
Opinion was mixed over whether Ofgem was restricting competition or empowering customers, following publication of the regulator’s Retail Market Review (RMR) proposals last week.
The plans limit energy suppliers to four core tariffs per fuel type and payment method, ban complex multi-tiered tariffs and force suppliers to switch consumers to the cheapest tariff by default when a fixed-term tariff ends.
There were concerns that the proposals could make the market anti-competitive and ultimately lead to price rises.
Monica Giulietti, associate professor of global energy at Warwick Business School, said that limiting the number of tariffs a supplier could offer would allow the big six to collude, leading to higher prices all round.
Co-op Energy and Ovo Energy, on the other hand, said the RMR proposals did not go far enough. They did not rule out predatory pricing and would therefore limit competition. Ovo founder Stephen Fitzpatrick claimed the reforms “won’t make it more competitive but will limit choice”.
Scottish Power was also concerned that the reforms could stifle competition and result in customers losing out on the best deals. Neil Clitheroe, chief executive of Scottish Power retail and generation, said that limiting special offers was “taking potential risks with competition” and the plan would be difficult to implement.
Ronan O’Regan, energy director at PwC, questioned how tariff limitations would fit with smart metering. He said it was always intended that smart meters be used to drive consumer behaviour change through time-of-use pricing.
However, EDF Energy and British Gas welcomed RMR, as did smaller player Ecotricity and switching site Uswitch.
Consumer Focus gave a qualified thumbs-up. It is a “positive package of measures” but “will not answer every question”, said Audrey Gallagher, director of energy. “Customers still doubt the relationship between wholesale costs, retail prices and group profits.”
An eight-week consultation on the RMR begins today (Friday) and Ofgem intends to start introducing the changes by summer 2013.
This article first appeared in Utility Week’s print edition of 26th October 2012.
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