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CMA proposes remedies to fix the energy market

'Today’s suggested remedies are a step in the right direction'

The Competition and Markets Authority (CMA) launched an investigation into the UK’s energy market in July 2014. Giving the time frame of 18 months, the CMA set out to find prevalent issues and remedies to allow the energy market to work better for consumers.

Today’s announcement from the CMA has produced remedies to the issues highlighted in the provisional findings released in July, and comes 2 months later than originally planned.

The CMA investigation so far

In findings given by the CMA, it’s clear that efforts need to be made by energy companies to help make competition in the energy market work better. A February 2015 update claimed 90% of the big six’s customer base were inherited through customers never bothering to switch supplier (being “sticky” customers). Rumours surfaced of breaking up the Big Six to stop them monopolising the market, however this has not come to fruition.

A finding from July 2015 was how customers had been overcharged by £1.2bn, as suppliers were not passing drops in wholesale energy prices on to households. Also criticised were the amount of people put in debt by suppliers with 97,000 prepayment meters installed over 12 months. The Big Six’s profits were also in the line of fire.

Proposed remedies

The main remedies proposed in today’s announcement all centre around making it easier and more appealing for customers to switch energy plans and save:

Database of disengaged customers

The CMA Proposes sharing the customer data of those who have been on a standard plan for more than three years. This would be so other suppliers can approach those on the database to offer them better deals.

Although well intentioned to get more to come off of expensive standard plans, many will raise concerns over unwanted marketing and data privacy.

Temporary safeguard price control

The introduction of a temporary prepayment safeguard price control will go towards helping vulnerable customers who often get a bad deal on prepayment. A price cap will limit how much suppliers can charge — aiming to make prepayment plans more competitive.

This would be in place until 2020, when the smart meter roll out is set to be completed. Smart meters will provide the ability for a wider range of tariffs and make it easier for customers to change meters.

Removal of four core tariff cap

Currently, suppliers are limited to offering four energy plans. The CMA have suggested lifting this cap which would produce a wider range of plans available to compare against a customer’s current energy bill.

Commenting on the lift of the four tariff cap, Richard Neudegg Head of Regulation at uSwitch.com said:

“The CMA is right to conclude that Ofgem’s four core tariff cap has actually restricted consumer choice. Relaxing these restrictions will benefit consumers by boosting innovation, choice and competition.”

Reforms to energy bills and annual statements

It has also been suggested that an Ofgem-led programme should trial changes including the information in domestic bills and how this is presented, and the names of tariffs.

Richard Neudegg comments:

“Consumers need much clearer information to help them use less, waste less and pay less for energy. Ofgem’s reforms to overhaul confusing, over-complicated and ineffective bills and annual energy statements can’t come a minute too soon for customers.”

“Today’s suggested remedies are a step in the right direction but the reality is that consumers could be waiting until after next winter, or even the winter after that, to benefit fully from its final recommendations.”

“In the meantime, the fastest and most effective way for consumers to save on their bills is by switching provider.”

Poll

  • Steve

    A 1 kwh of Energy costs a specific amount to generate. The standing charge should be the only variable with less dense areas areas up to high density areas being the only relevant factor. Even then this should not be an issue because the majority plant in the ground has existed since before privatisation.

  • Firesale

    Renationise the energy companies they should be considered a public utility .Privatisation has failed the domestic consumer miserably.

    • Jings

      You can’t expect the CMA to suggest this – it would do them out of a job.

      • Eric Thomas

        I totally agree, as an Electrical Power Engineer who spent 35 years in Generation, Transmission & Distribution in the UK’s Electricity Supply Industry, and then 10 years in Energy Management here. Thus I saw it for 20 years as the Best, most efficient, cost effective and reliable Supply System in the World………..and then since Thatcher’s unregulated privatisation of it, become a total shambles, run into the ground by foreign companies, after the Conservatives and their Cronies had first taken all of the money out of it with cheap sell offs, to become even richer!!! Now it will cost us, if you didn’t think it has already!!!!!

  • Mac McConnell

    20 odd years ago,I worked for an independent inspection company auditing welders who were recruited by CEGB to build Hinkley C.
    Then our leaders decided that it made sense to sell CEGB nuclear to the French, who will charge 3 times as much to generate power for us -if they ever do build Hinkley.C. But that’s OK because we already import French generated nuclear power via a cable from Sangritte ever since 1986. Switching is like shifting the deck chairs on the Titanic -too late and pointless……Bullsh.t baffles brains as we used to say .

  • m28 steve

    How much a customer is charged she be based on the cost of production and distribution. The amount of profit a supplier makes should be limited… A reference price should be established and suppliers should have to discount on this price if they want more customers. This should be funded by reducing their costs…
    It is obvious that the current market is arranged for the suppliers benefit… as someone has already said.. bullxxxx baffles brains. If they can’t meet this… the industry should be taken back into government control then operated for the benefit of the public not as a profit cash cow for business.

  • LGill

    Would appreciate some investigation into how energy companies can put you on a tariff subject to your usage then after a year inform you that you owe them a lot more money than your monthly direct debits have been paid, thus tying you to them instead of being free to move to other suppliers. This has happened to me twice through SSE, first time with my gas usage then this time electricity. I’m not in a position to repay the ‘arrears’ in a lump sum to free me to go elsewhere!

  • John Dennis

    Answer to LGILL, A a supplier of gas I can understand in the first instance how a gas supplier may get your useage wrong. It’s because we are supplied with information from the outgoing supplier to include your usage for the last 12 months and although this information is correct its 12 months out of date. The new smart meters should change the present norm because suppliers will have a constant source of data from the smart meter allowing for 3 monthly reviews. In the meantime the onus is on the customer to provide monthly reads to ensure that they are being billed correctly. Warning to all keep your supplier informed to avoid under or over paying.

  • John Dennis

    Saving money is not easy, if all companies had to use the same price they would be considered to be in cahoots with each other and the price set would be high. The idea of having more suppliers is to put competition into the market. My advice is to find the cheapest gas/electricity supplier today and switch, we do all the work once you have given your details to us.

  • Eric Thomas

    I totally agree that we should Renationalise the energy companies. As an Electrical Power Engineer who spent 35 years in Generation, Transmission & Distribution in the UK’s Electricity Supply Industry, and then 10 years in Energy Management here. Thus I saw it for 20 years as the Best, most efficient, cost effective and reliable Supply System in the World………..and then since Thatcher’s unregulated privatisation of it, become a total shambles, run into the ground by foreign companies, after the Conservatives and their Cronies had first taken all of the money out of it with cheap sell offs, to become even richer!!! Now it will cost us, if you didn’t think it has already!!!!!

  • Michael Jackman

    Whilst the CMA intentions are basically good, they do not nearly far enough in curbing the excesses enjoyed by ALL Energy suppliers. In addition to the above which should be brought in with in the next three months, the plans should also be back dated to the time of a consumers last supplier/tarrif change, with NO penalty charges at all being levied for changing suppliers, and suppliers should be fined £100.000 for each supposed anomily of changing suppliers. They have been allowed to steal consumers money and should now be forced by law to conform to what the majority of consumers want…… FAIRNESS.

  • Michael Jackman

    On another issue, Can anyone tell me why there should be such a massive difference in the daily standing charges for Electricity and Gas, and why they are vastly different from one supplier to another? The variances I have recorded just this year are in an unbeliveabe range of 5% to 110%.

  • Lauren Vasquez

    If you do not have access or not comfortable with a computer, you can always call uSwitch’s London-based call centre to speak to our energy experts (0800 6888 244). They are very helpful, patient and happy to walk you through the whole process. You can see some of their stellar reviews and comments on Trustpilot: https://uk.trustpilot.com/review/www.uswitch.com !

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