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CMA energy market investigation update: millions are punished for being loyal

Competition and Markets Authority finds majority of households are overpaying by as much as £234 for not switching

CMA

CMA publishes energy investigation update

The first update since the Competition and Markets Authority (CMA) launched its initial report and subsequent investigation into the energy market has proved what many have been saying for a long time: households that remain loyal to their supplier by not switching end up overpaying by hundreds per year.

Big six ‘dominate’

Back in July 2014, the CMA released a report stating that energy prices, the dominance of the big six and lack of competitiveness were their top issues of concern. They also stated that they planned to look at energy bills, service quality and profitability.

At this time, the CMA also stated its theories on which factors were harming the industry, including lack of transparency, “vertically integrated electricity companies” and lack of consumer engagement and switching — the latter meaning the supplier would not be incentivised to compete on price.

Loyal customers punished

Seven months into the 18-month-long investigation has found that more than 90% of UK homes are on energy plans from the big six (British Gas, SSE, EDF Energy, ScottishPower, npower and E.ON), simply because these six companies “inherited” these customers when the industry was privatised in 1995. The CMA update refers to these as customers as “sticky”.

Further, 95% of those consumers who have been with the same supplier for some time could have saved between £158 and £234 per year if they had switched.

This is a particular issues for the most vulnerable of customers, including the elderly, who view switching as “impossible.”

But the elderly were not the only consumers losing out; the CMA found that those customers most likely to be on expensive standard tariffs were less educated, were on lower income, singles parents, and did not necessarily have access to the Internet.

Switching has ‘hit rock bottom’

Ann Robinson, uSwitch.com Director of Consumer Policy, says of the CMA’s update:

“The number of people switching supplier has hit rock bottom and so the key to the outcome of this investigation will be how to increase levels of consumer engagement in the market. If more of us shopped around, suppliers would have to up their game through lower prices and better customer service to attract and retain customers.

“We also welcome the CMA’s scrutiny of Ofgem’s retail market review and believe that more can be done in the here and now to help more consumers engage with the market. For example, Ofgem should review the effectiveness of annual energy statements and whether more could be done to make bills easier to understand.”

Breaking up the big six?

As the CMA investigation will continue, and the question remains whether the watchdog will advise breaking up the big six energy suppliers over abuse of power.

Energy Minister Ed Davey has stated that if this is the case, he would not hesitate to take action:

“If the evidence from the CMA is strong that the next step ought to be breaking up a company, if the Competition Markets Authority recommend that, certainly I as a Liberal Democrat, talking to the voters in the next election, will make it clear, we would not flinch from taking that tough action.”

  • SheffieldBear

    Scottish Power do currently have the cheapest tariff on the market atm averaging at £918. So they obviouslly are doing things for the people will to go that extra mile and try to save themselves some money

    • vic

      THAT IS NOT TRUE, I HAVE BEEN PAYING SCOTTISH POWER AROUND £375/ANNUM MORE FOR THE PAST TWO YEARS FOR ECONOMY SEVEN. I HAVE JUST SWITCHED OVER TO ANOTHER SMALLER SUPPLIER. THIS IS DUE TO MISINFORMATION GIVEN ME BY SCOTTISH POWER, TELLING ME I WAS ON THE LOWEST TARIFF AVAILABLE IN THE ENERGY MARKET. THEY HAVE BEEN TELLING ME LIES WHICH MEANS CHEATING AND DECEPTION.

      • TP

        I strongly agree with you. We switched from Scottish Power to OVO last August because of the lies they told and appalling customer service together with a much better deal with OVO – I am still waiting for a refund of the fairly large amount of money Scottish Power owe me!

        • vic

          thank you. we should all strongly insist on the refund owed us by the deceptive and deceitful scottish power. please keep in touch, if necessary for a joint action against the scottish power. i feel very strongly about this rip-off.

        • vic

          i have now taken the Scottish Power to ombudsman for compensation, what about you?

      • Peter Read

        Why not press your claim through the courts? You are at liberty to use The Small Claims Procedure for this claim and it would require a response from SP or they would be found in default. Should that happen you could send in bailiffs to remove and sell their property or collect your £750.

  • hank

    bear how can you say that it depends on how much a household usage is to what will be cheaper

  • Louise

    I help compare g&e and stay impartial it depends on your area and usage to what is the cheapest for you. Most people are surprised of the outcome.

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