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.
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.”