22/12/2017
Ofgem approves new system for projecting household energy bills (UK)
Each individual energy supplier and confidence code comparison site now has the freedom to develop its own methodology for estimating a household’s annual energy costs in a manner that suits them and their customers, rather than all being obliged to use the same prescriptive and inflexible method.
‘Decision: Estimated Annual Cost for domestic consumers’ explains why Ofcom decided to exchange the existing ‘one size fits all’ methodology for an approach based on the proposals set out in the consultation ‘More freedom for energy suppliers to tailor cost predictions (UK)’ (CPA News, 3 November 2017).
The rules implementing the new approach come into force from 14 February 2018, although suppliers and the comparison sites to which they apply can start immediately to develop and apply methodologies that will help their customers budget and make informed choices.
Ofgem’s aim is to ensure that the Estimated Annual Cost Rules continue to provide strong protections for consumers, while also being sufficiently flexible and ‘future-proofed’ to reflect the range of tariffs on the market now and in future.
As stated in the consultation, the estimates produced under their new methodologies must
- be personalised to the consumer, based on information that is reasonably available to the supplier or comparison site or on reasonable assumptions where actual data is not available
- be based on actual historic consumption or a best estimate of consumption where this is not available
- include non-contingent discounts and non-optional bundled charges and exclude contingent discounts and optional bundled charge
- be applied consistently when it is used to provide the consumer with a comparison of different tariffs
- be transparent and accompanied by a description of the estimate that makes clear to the consumer what it is, what it can be used for, and any assumptions that have been made in its calculation
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