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More to do to get a better deal for energy consumers

uSwitch Director of Consumer Policy Ann Robinson gives her take on the 12 months since Amber Rudd's letter to energy suppliers

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A year ago, Energy Secretary Amber Rudd wrote to the big six energy suppliers to demand why hard-pressed consumers weren’t seeing bigger reductions in their gas and electricity bills.

Fresh in her role in charge of the Department for Energy and Climate Change, she challenged suppliers to explain why they were failing to pass on significant wholesale price reductions to customers sooner. With the threat of Labour’s price freeze off the table after the election, her message was clear: the energy industry needed to do more to regain consumers’ trust and cut prices.

So, one year on, what’s happened?

In terms of bill reductions, not nearly enough. Wholesale gas and electricity prices have fallen by a third and a quarter, respectively, in the past year. Yet the 70 per cent of customers on so-called standard variable tariffs would have barely noticed, given these plans have reduced by just 2.7 per cent, or a mere £30, in the past 12 months. With wholesale prices accounting for around half of bills, standard plan consumers should be paying around £160 less today than this time last year – a £130 shortfall.

On the other hand, competition between suppliers on fixed rate tariffs continues to be fierce. These deals have plummeted a staggering 11 per cent in the last year, with suppliers large and small battling over the winter to take top spot in the best buy tables.

How can we get more people engaging with the market?

The challenge, therefore, is how do we get more people engaging with the market to put far greater pressure on suppliers to lower prices and improve customer service for more consumers? The Competition and Markets Authority’s (CMA) energy market investigation, due to end later this month, should be a game changer. The CMA is right to conclude that better competition, with protection for the most vulnerable, is the best way to transform the broken energy market.

Its final package of reforms will be a major step in the right direction, but there is a real risk that consumers may not see an immediate benefit. That’s why regulators, Government and the industry must work together to implement the CMA’s final proposals quickly. It’s encouraging to see some changes already starting to happen. For example, Ofgem is already allowing suppliers to develop innovative new tariffs and is working up proposals to redesign energy bills to make them far easier to understand.

But a more competitive market won’t help everyone, especially the most vulnerable, and these consumers need additional support. That’s why uSwitch is calling on Government to extend the Warm Home Discount – a £140 electricity rebate to eligible customers – to all energy suppliers and increase the pot of money available, to help more of those in need.

The success of the CMA’s final proposals must be properly evaluated as they are implemented. Switching rates are a strong indicator of competition and we believe ambitious targets should be set to monitor those changing suppliers, tariffs and comparing deals, as the reforms are put in place. Increasing switching by just ten per cent a year would have a transformational effect on competition in the market, driving down prices and improving customer service for far more customers.

The past year may have seen little impact in terms of lower bills for the majority of customers, but, with the CMA’s final report just around the corner, the next 12 months are set to see some of the biggest changes in the industry in over a decade. What’s vital is that these reforms lead to millions more consumers taking control of their energy use and spend.

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  • peter

    First Utility is a bad company to buy electricity from ! 8 months down the line my bills is incorrectly billed although accurate readings given on the fixed date requested each month !!!

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