Back in July 2014, the Competition and Markets Authority (CMA) launched an 18 month investigation into Britain’s energy market — namely the big six and what can be done to tackle their domination, behaviour and price rises.
Bills are a common source of complaints from customers, and the CMA investigation became concerned with them, along with the customer service received by households. The big six’s profits were also under the spotlight as an indicator of how much people are being overcharged; this comes at a time when debt to suppliers is high, including 97,000 forcibly installed prepayment meters last year.
An update in February of this year revealed how 90% of the big six’s customer base were inherited through customers never bothering to switch supplier (being “sticky” customers), and it looked like dismantling the big six was on the cards to stop them monopolising the market — however, this hasn’t happened.
The results are in
The provisional findings of the 18 month investigation were released Tuesday 7th July, along with a series of possible remedies for the issues raised.
The CMA have concluded that energy suppliers had overcharged customers by a staggering £1.2bn for their bills. The energy market is not as competitive as it should be, as had the big six been operating in a competitive market, they would have charged consumers less.
The four tariff rule implemented by Ofgem (limiting the number of tariffs on offer under each supplier) has been seen by the CMA to not have the desired effect on competition, and may have actually reduced the likelihood of suppliers offering cheap energy plans.
The introduction of a price cap has been proposed, that would act as a stop gap whilst encouraging competition, and getting energy suppliers to lower their tariffs; this is just one of the CMA’s proposed remedies
What does it mean for consumers?
Ann Robinson, uSwitch.com Director of Consumer Policy believes the report correctly highlights the need to address low levels of engagement and boosting competition.
“Proper competition is essential to make this market work and so additional regulation should be a last resort.
“In the interim, the idea of a transitional price cap could go some way to protect the 70% of big six consumers languishing on expensive, standard plans, while reforms to boost competition are made.
However, energy suppliers shouldn’t be waiting for regulators to tell them to cut prices when their own costs fall.”
Switching supplier is encouraged
This provisional CMA report suggested that not only were energy suppliers to blame for high prices, but consumer apathy and disengagement also needs to be dealt with.
Dual fuel customers are currently experiencing the largest savings in five years from switching their supplier, yet still millions of consumers are disconnected from their energy. The more proactive people become in saving as much money as they can on their bill, the market will have to adapt and be more competitive.
Update – SSE introduce cheapest fixed plan
Days after the news of the big six’s overcharging, supplier SSE has introduced a competitive fixed energy plan. With an average bill size of £899 for a dual fuel medium usage household, this plan is the cheapest fixed plan currently available — and is also an eligible option for electricity only consumers.
Will this spark a price war with other big six suppliers following suit?