Ofgem Ban Termination Fees Following Price Increases

backfoot

Ofgem have now clarified that Suppliers cannot charge Termination Fees following price increases.

There are to be no exceptions under SLC23.

Any claim by a Supplier that the Contract contains Tand C's referring to Termination Fees will carry no weight.

Some suppliers had claimed that tariffs such as discounted or guaranteed were exempted. That was complete nonsense and has now been clarified by Ofgem.

I am delighted that Ofgem have responded so positively to clarify the matter in favour of customers. It just shows that individuals do have power to influence such matters.

The ruling can now be found here:

http://www.ofgem.gov.uk/MARKETS/RETMKTS/COMPL/PRICECHANGE/Documents1/Guidance%20letter%20on%20SLC%2023.pdf

caveat_emptor

can you give a source for the info. Can't see anything about this on Ofgem website.

backfoot

An Open letter to Suppliers was sent out today.It should appear on the Ofgem website soon. I don't know their update timetable.

I have it as an attacment in Adobe but I am having trouble in copying it across here.

insanegloss

backfoot wrote: »

Some suppliers had claimed that tariffs such as discounted or guaranteed were exempted. That was complete nonsense and has now been clarified by Ofgem.

To clarify further, does this affect variable tariffs only (discounted or otherwise) or include fixed rate deals?

I understood previously that this applied to all variable tariffs and did not affect fixed rate deals.

MillicentBystander

How can a fixed tariff increase during its term?

Cardew

insanegloss wrote: »

To clarify further, does this affect variable tariffs only (discounted or otherwise) or include fixed rate deals?

I understood previously that this applied to all variable tariffs and did not affect fixed rate deals.

Ofgem have now clarified that Suppliers cannot charge Termination Fees following price increases.

Mmmm

By definition a fixed rate deal will have no price increase!

insanegloss

It cannot, but the sentence was "discounted or guaranteed", wasn't very specific. Potentially it could lead someone to mistakenly believe they can get out of their fixed term without paying any termination fees during times of standard tariff price changes. Just clarifying the wording.

dogshome

Thanks Backfoot - Your tenacity has paid off big-time - The only question now is how we get you appointed as a lay member of Ofgem.
The general medical Council who govern Docters has them, so why not Ofgem?

backfoot

Dear Colleagues

Guidance on notification of price increases - Standard Licence Condition 23

1.1. This letter1
is intended to provide domestic electricity and gas suppliers („suppliers.)
with guidance on the requirements of Standard Licence Condition 23 („SLC 23.) which relate
to unilateral variations to Domestic Supply Contracts2.
1 This guidance is being published pursuant to section 35(1) of the Gas Act 1986 and section 48(1) of the
Electricity Act 1989.
2 In this letter many of the words and expressions which begin with capital letters are intended to be interpreted
in accordance with Standard Condition 1 of the gas and electricity supply licences.
3 By way of example, it has always been clear that the main purpose of SLC 25A was to address undue
discrimination between the prices charged for different groups of domestic customer and this licence condition
refers to “the Principal Terms” which is defined as including “the Charges for the Supply of [Gas/Electricity]”.


Background and purpose

1.2 Following reports from consumers and consumer groups, Ofgem is concerned that
domestic suppliers may not be complying with their obligations under SLC 23 in connection
with notifying customers about price increases and the prohibition contained in Supply
Licence Condition 24 („SLC 24.) on charging termination fees in the event of a price
increase.

1.3 Ofgem has therefore decided that it is appropriate to issue guidance to clarify when SLC
23 applies to a price increase and therefore when the protections for consumers contained
in SLC 23 and SLC 24 apply.


Ofgem’s Guidance

1.4 Ofgem is firmly of the view that any standard licence conditions for supply that refer to
contractual terms and conditions, Principal Terms or Charges for the Supply of
[Gas/Electricity] were always intended to capture the actual price (e.g. actual unit rate(s)
and standing charges) that applies to individual customers, i.e. the price itself would always
be treated as part of the terms and conditions3.


1.5 Accordingly, for the purposes of SLC 23.3, the reference to “the licensee unilaterally
[varying] a term of the contract: (a) to increase the Charges for the Supply of
[Gas/Electricity]…”, has always captured (amongst other things) any increases in the actual
unit rate(s) or standing charges that are subject to the discretion of the supplier4.
Therefore, any domestic supply contract which provides that the price is guaranteed to be
lower than the supplier.s standard tariff rates will be subject to the requirements of SLC 23
in the event of any price increase (including an increase within the guaranteed range).
4 An example of a price variation which would not be considered to be at the discretion of the supplier is a
variation which is automatically linked to fluctuations in a stock exchange quotation or index or a financial market
rate (e.g. the Retail Prices Index) that the supplier does not control.
5 See paragraph 1(b) of Annex 1 of DIRECTIVE 2009/73/EC OF THE EUROPEAN PARLIAMENT AND OF THE
COUNCIL of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive
2003/55/EC and DIRECTIVE 2009/72/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 13 July 2009
concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC, and paragraph
(b) of Annex A of DIRECTIVE 2003/55/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 June 2003
concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC and DIRECTIVE
2003/54/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 June 2003 concerning common rules for
the internal market in electricity and repealing Directive 96/92/EC.

1.6 In support of this firm view, Ofgem notes that it has always been necessary to interpret
SLC 23 in light of the consumer protection measures contained in the Gas and Electricity
Directives which require that “Service providers shall notify their subscribers directly of
any increase in charges”5(emphasis added).


Next steps

1.7 Ofgem wishes to confirm that as part of the next steps for the Retail Market Review
(„RMR.) it will be considering whether licence modifications are necessary to any licence
conditions in order to clarify their original intent and to facilitate any of the RMR proposals
or alternatives which are to be taken forward.

MillicentBystander

I have to say IMO backfoot is undoubtedly the most important and impressive member of the G&E forum - whilst the vast majority of us just whinge and moan about injustices to anybody who will listen on here, backfoot goes to work on them. More power to his elbow I say.

backfoot

I have copied the above as best I can. The formatting isn't good but the actual document should appear on the Ofgem website shortly.

Bet MSE claim the exclusive soon.....:rotfl: