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Bye bye to Ofgem’s SMI

ofgem straplineWe’d predicted it wouldn’t be long before people caught on to Ofgem’s dodgy supply market indicator (SMI) reports.

The SMI aimed to provide a 12-month forward view of cost trends using the average annual consumer bill and estimates of the annual cost per customer to the supplier, including wholesale commodity and policy costs.

Excellent news for customers trying to ascertain when they should be buying energy and how long to contract for. It was even used by the national press to give readers an idea of company profits despite the fact that the report is not based on financial results from any of the large suppliers!

The model used to produce the report could not take fluctuating prices or hedging strategies into account, and as a result, presented misleading data on the suppliers.

In August last year former Energy UK chief executive Angela Knight said:

“The SMIs are not reliable, are being used in a way that is misleading and must be reformed.”

So the day has come, Ofgem are scrapping the current tool under the guise of an ‘information review’ with a promise to introduce a new range of wholesale and retail market indicators.

“This summer we will announce a new range of wholesale and retail market indicators which we will be publishing on a regular basis,” the regulator added.

We wait with baited breath to see what they’ll come up with next. Will any of their figures be based on fact from here onwards? We’ll reign in our cynicism…