Ann Robinson, our Director of Consumer Policy, has sent the below to MPs and industry bodies, such as the Energy and Climate Change Committee, today to address the possible outcomes of the Ofgem investigation into the energy industry.
uSwitch’s major concern is the impact of Ofgem’s subsequent action on consumers.
In her letter, Ann explains why Ofgem should concentrate on how to increase consumer confidence and engagement rather than make a referral to the competition commission which could create a hiatus and uncertainty:
I am writing ahead of Ofgem’s market report, expected shortly. Ofgem will be looking to make the competitive energy market work properly and it will have three choices: to do nothing, to introduce further remedies or to make a competition commission referral. When making its choice, it is important that the regulator understands that the market is working very well for those consumers who use it – the problem is that not enough people are doing so.
Given this, the first option is not realistic, especially as Ofgem’s own research shows that around four in ten households have never switched energy suppliers and less than one in five people regularly use the market to shop around for a better deal. This is clear evidence that consumers are not engaged in the market. The third option of a competition commission referral should also be ruled out. With the huge amount of investment required in our energy sources and supplies now is not the time to tie the industry up in a lengthy process that will cause considerable risk and uncertainty.
We believe that the right approach is to make the market work better for consumers. Key to this is ensuring that consumers are in a position to make informed choices as this will give them the confidence and authority to use the market to their advantage. Following the last Ofgem probe some measures were put in place, but more needs to be done. There are still barriers preventing people from using the market and Ofgem needs to identify these and bring in measures to dismantle them.
Some of the remedies it could consider are a concerted, high profile campaign to build consumer education and confidence in the market; greater clarity and simplification of pricing and making sure suppliers provide simple, clear and easy to understand bills. Further work is also required on annual statements. Consumers have told us that these statements are not fit for purpose. They are poorly designed, badly labelled and difficult to identify. We would like to see clearly labelled, simple and consistent annual statements that will give people the information they need to make informed choices, as Ofgem originally intended.
It is vital that people understand that household energy bills are likely to increase significantly in the future as a result of the huge amount of investment needed. We would like to see Ofgem work with the industry to calculate a total cost per household of the entire programme of investment and to make this figure public so that households can start to take preventative measures. Not only will it help them to prepare, but it should act as a stimulus for people to start to behave like consumers and to start using the competitive market to find ways to lower the cost of their energy bills.
Ann Robinson, Director of Consumer Policy at uSwitch.com
- Ann Robinson: Why Ofgem needs to get tough read the reasons behind Ann’s advice.