WIREDGOV

Suppliers face different costs for the energy payment methods they provide. We have a strong track record in clamping down on unjustified price differences between these payment methods. Our energy supply probe resulted in more than £300 million in unjustified price differences being removed, including those related to customers using pre-pay meters.  

We introduced a rule which stops suppliers charging more for one payment method compared with another, unless it can be justified by cost. If we find evidence that suppliers are not complying with this rule we take action. We are investigating Scottish Power’s compliance with this licence condition. We will also be collecting further information on suppliers’ approaches to setting price differences between payment methods as part of the first Competition Assessment that we are carrying out with the OFT and the Competition and Markets Authority (CMA). 

As part of our 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 we 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 our 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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Notes to editors

1. Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority’s powers and duties are largely provided for in statute, principally the Gas Act 1986, the Electricity Act 1989, the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.