Ofgem halves rules to open supply market possibilities


Alistair Buchanan,
Chief Executive,
London, U.K. — (METERING.COM) — August 2, 2007 – U. K. energy regulator Ofgem’s review of rules governing the supply companies balances improved protection for vulnerable customers and greater opportunities for innovation in the market. Ofgem has cleared the way for energy suppliers to offer more innovative products that could bring better deals to customers and environmental benefits.

At the same time Ofgem has improved protection for vulnerable customers, made it simpler for new players to enter the supply market and removed obstacles discouraging companies from introducing technology to improve accuracy of bills.

In its review of the licence conditions that govern the supply companies, Ofgem has axed the 28-day rule that allows customers to switch supplier only four weeks after signing up with another. This has made it difficult for suppliers to offer long-term deals that include installation of energy-saving measures. Ending the 28-day rule is one element of a wide-ranging project – the Supply Licence Review. It came into force on August 1 2007 and includes:

  • Halving the number of licence conditions and simplification of the remaining rules to open the way for new entrants to the supply market.
  • A revision of conditions to pave the way for companies to offer smart meters that can be read remotely and can aid householders in cutting their consumption.
  • Improving information available to vulnerable customers on carbon monoxide risks.

The Supply Licence Review has been a major undertaking involving some two years’ work. It demonstrates Ofgem’s commitment to the government principles of better regulation in reducing the regulatory burden while improving protection of customers’ interests.

Under the licence conditions, suppliers are obliged to inspect meters every two years. Many suppliers have told Ofgem that this is a barrier to the introduction of smart metering. Ofgem will now be able to issue derogation from this obligation to a supplier seeking to install smart meters. The supplier must demonstrate that customers will be better off and that safety will not be compromised.

“We have fixed in place protection to ensure that vulnerable customers are well served by the market while clearing the decks to allow innovation. We look now to the companies to respond,” said Ofgem Chief Executive Alistair Buchanan. “The Supply Licence Review is a model piece of regulation, taking out unneeded legacies from the early days of privatization, improving the clarity of what is kept – all to the potential benefit of customers, industry and the environment.”

Consumer groups are not convinced, however. They fear that the removal of the 28-day rule will make it much more difficult for energy consumers to switch supplier, and that utilities could be tempted to try to tie customers in to long-term – and more expensive – plans.