Energy Secretary Chris Huhne

Ofgem plans overhaul of UK energy bills

Ofgem has announced plans to overhaul energy pricing which will force energy firms to simplify their billing structures.

Energy regulator Ofgem wants to make radical changes to avoid stifling competition and make it easier for consumers to compare prices.

Profit margins for energy firms have increased more than eight times since June as a result of rate hikes by Britain's six dominant energy companies, it said

Ofgem said the plan was the "first of four waves of reform" which would include plans due in November to help business users and in December decisions on proposals "to break the stranglehold of the Big Six in the wholesale electricity market".

It estimates companies are making £125 per customer in profit, compared with £15 in June, although it said margins should shrink to £65 in November.

Poor supplier behaviour and a lack of transparency in a system where consumers are currently faced with more than 400 tariffs to choose from must be addressed, Ofgem added.

Electricity and gas firms will still be able to offer a mix of products but under the Ofgem plans it will set a fixed standing charge on top of which the companies will have to offer a variable price per unit, making bills clearer and price comparison easier.

The plans mean the only variable on any bill will be the price per unit of gas or electricity and extra layers of complexity such as discount structures will be removed altogether.

"So the lower the price the smaller the bill, with no exceptions," Ofgem said in a strongly worded statement which chimed with recent speeches by senior members of the government who have called on it to get tough with suppliers.

Prices have risen sharply in recent months, putting pressure on the government to ease the pain for consumers grappling with rising unemployment and sub-inflation wage growth.

Britain's energy minister Chris Huhne has pledged "to get tough with the big six energy companies".

Britain's six largest utilities are German groups E.ON and RWE, British companies Centrica and Scottish and Southern Energy, French operator EDF and Spanish firm Iberdrola .

Ofgem said its latest report on prices showed the average dual fuel bill in Britain now stands at £1,345 a year.

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