From today, energy suppliers will not be able to use complex and confusing bills, and will only be able to offer every customer four gas and/or electricity tariffs, in order to "help people get the best deal" on their energy.
Further reforms will come into force in April, when suppliers will be forced to tell their customers which of their rates are the cheapest for them.
Andrew Wright, Ofgem’s chief executive, said in a statement: "Profits are not an entitlement, they should be earned by companies competing keenly to offer consumers the lowest prices and the best service.
"Now it is up to suppliers to build on our reforms to restore consumer confidence in the energy market." He added that the regulator will take further action if there is evidence of further blocks to effective competition.
Despite Ofgem’s praise for the new system, many are still claiming that it does not go far enough. Richard Lloyd from consumer group Which? says not enough is being done to make sure customers are on the best rates, while Consumer Futures’ Mike O'Connor said it would be “naïve” that these reforms will sort out the energy market once and for all.