Ofgem, which is investigating the UK’s energy suppliers following last winter’s series of gas and electricity price rises, is due to release its findings in the near future.
Ann Robinson, our Director of Consumer Policy, has written to several MPs and industry bodies with advice on what she feels would improve the market for customers, which you can read in this blog post.
Here, she explains her position and why there’s need for an industry wide shake-up.
(Don’t forget to vote for what you think Ofgem should do at the end of this post.)
Energy regulator, Ofgem, needs to take tough action to get the energy market working fully for consumers.
Ofgem decided to investigate the energy companies after it discovered there had been a huge increase in energy companies’ profit margins – the difference between what we pay and they pay for energy. This was before recent price increases and these margins have grown to an average of nearly £100 per household or nearly 10% of the average bill.
Ofgem is going to produce its report soon and I feel quite passionately that it should focus on getting this marking working for all of us. With over 40% of us never having switched suppliers and only 20% of us switching regularly the market can’t be said to be working well for consumers, but it could if more people were using it.
I regularly switch and review whether I am on the best deal every year. As a result over the years I must have saved a good four figure sum. At the moment there is £316 between the cheapest and the most expensive energy deals out there so I find it really frustrating that people regularly switch their mobile phone provider for much smaller sums, but don’t take advantage of the energy market to get much better deals. In fact, for those who have never switched, a saving of up to £458 could be on the cards.
Anyway I don’t believe Ofgem can come out with a report and say everything in the garden is lovely. Nor do I want it to make a reference to the Competition Commission who could take up to two years to decide whether this market is working or not, while the investment we all know is needed to replace some of dirty and old power stations, as well as to make energy cleaner, is put to one side because of the uncertainty. Instead I want Ofgem to look at what is stopping this market really taking off.
I think the fundamental reason is lack of consumer confidence. This is hardly surprising when there are so many complicated tariffs to choose from and so much jargon to contend with. Honestly I am an energy expert, but I always use the uSwitch site to review my energy because I can’t handle so many complications without it.
There are also inconsistencies, such as the two tier pricing structure where you pay more for the first lot of energy units you use. This hardly encourages anyone to be energy efficient and rewards those who use more energy. So we need some simplification.
Secondly we are all meant to get an annual statement which provides a clear message about switching and all the information needed to be able to shop around and better able to manage our energy. Well I have been looking at some of these statements and, despite putting a wet towel around my head, I still had problems getting what I needed from them.
I would like Ofgem to come up with a simple template that energy companies must use and which does what it was meant to do – give us the information we actually need.
And last, but not least, I think we need to understand why people are scared or unwilling to shop around. I used to be Chair of Energywatch – the Government’s consumer champion for energy users.
At that time, and one of my main concerns was to take the hassle out of switching energy suppliers.
Fast forward to my days here at uSwitch and the transfer from one supplier to another always comes top of our annual customer satisfaction rating. It works, it is simple to do and the gas and electricity do not get switched off when you are doing it.
It breaks my heart that so many people are really struggling to pay their bills. During the bitterly cold winter months over three quarters of us rationed our energy use when there are savings to be made which would have made all the difference.
So Ofgem, please look at the barriers preventing consumers from making this market work, remove them where you can and build consumer confidence through a massive consumer education and information campaign. It’s now time for action.