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A joint call for the energy market to be investigated

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The Federation of Small Businesses (FSB) supports our calls to fix the broken energy market. Which? executive director, Richard Lloyd, writes to the regulators alongside Mike Cherry, the National Policy Chairman.

Dear chief executives of Ofgem, the Office of Fair Trading & Competition Markets Authority,

Nine in 10 consumers tell us the energy market should be referred for further investigation. As your organisations are about to jointly report on the market assessment, our organisations jointly call on you to refer the market for a phase two investigation to address the pressing issues in the energy market today.

Which? research shows that seven in 10 consumers are worried about energy prices and only one in five trust the energy companies. Ever rising energy bills also continue to be a major concern for small and micro businesses, whose needs are more similar to consumers’ than big business as set out in a recent report for the FSB.

It is clear that the energy market is broken and urgently needs fixing. Top of our concerns is the need to increase competition and to make trading transparent. For too long the lack of competition in the energy market has not been addressed. It is now time for radical changes that deliver an effective, competitive market that works for everyone, before the scale of this crisis worsens.

We all want to see a transparent market where consumers and businesses alike can understand their bills, compare prices and switch easily. We want to see the presence of strong competition right across the industry drive affordable pricing that give everyone the confidence they are paying a fair price for their energy.

Only then will we genuinely be able to set about reversing the trend, and rebuild consumer trust in the energy market.

Yours sincerely,

Richard Lloyd, Which? Executive Director

Mike Cherry, FSB National Policy Chairman


Many of these energy companies are part of larger organisations many of which have their own generating arm. So even though they bleat on about buying energy from the open market, it is in fact several of these companies that can set their own prices.

Is something going to be done to restrict the profits these companies make there ?

And when they say they need to up process to upgrade infrastructure and build more energy production capability what have they done with all the fat profits they’ve made to date ? They should have been doing this years ago.

Yes I agree with William
Ofgem need to ensure that a reasonable percentage of profit goes towards new infrastructure and not added to consumers bills when conducting their annual price reviews. With added uncertainty relating to the situation in the Ukraine [which has now become a political issue] this is surely going to have an affect on energy prices The more we become self sufficient the better but this won’t necessarily reduce prices I don’t think. Politicians need to ensure we keep the lights on at the end of the day.

Let’s hope that Ofgem come up with some encouraging news in their promised report at the end of March.

Whilst I,too, want to see energy prices set by the supp[liers on a fair basis, and as transparent as is sensible to force commercial companies to do, I also want then driven by fact, not emotive and populist mantra; “broken markets” stems from politics – not something I hope Which? is allied to.

A report is due to be published on the market by Ofgem et al at the end of this month. This will no doubt be a judgement on their ability, or lack of, to resolve the energy issues we are all concerned about. Then put the pressure on.

It would be useful if Which? provided responses to comments made in the many conversations about energy prices and energy suppliers. I hoped the purpose of these conversations was to advance arguments by providing information, facts and contrasting opinions. There seems a reluctance for Which? to do this. And not just on energy – many conversations that generate interesting experieinces, views and requests for help seem to fizzle out. Perhaps I don’t understand the purpose of these conversations.

“Nine in 10 consumers tell us the energy market should be referred for further investigation” – be interesting to know where this figure comes from.

“Which? research shows that seven in 10 consumers are worried about energy prices” – it wouldn’t
take much research to show this – of course we are. I’m also worried about food prices, rent costs, fuel and commuter costs. All, for many people, two or three times higher than energy. Where are Which? attacking these?

Mike Cherry – Which?. You might check that the links in the introduction work?

Thanks Malcolm, we’ve fixed those links now.

Thanks Mike. The three links all go to a poll supported by 45473 members as at now. How does this show that “only one in five trust energy companies”, “it is clear the energy market is broken”, when there are over 600 000 Which? members – 92.4% of whom appear not to have given their opinion?
Whilst I completely agree with the need for an open understanding of the energy market, it worries me that your basis for demonstrating support may not be robust.
As I have said elsewhere, I would like to see constructive proposals put forward to change the way we pay for energy – removing VAT (not charged on other essential services such as rent, public transport and food), remove the other government charges – carbon tax, supporting low-carbon technology, improving customer energy efficiency, supporting vulnerable customers, – which between them account for around £194 of a typical energy bill.
Why not consider arguments that reduce energy bills by, for example, transferring some charges not related to energy consumption into general taxation?

Sorry Patrick – thanks (assumed Mike was replying!)

Paul Hunt says:
25 March 2014

What is the point of this posturing by Which? and the FSB? The report on this energy competition review by this collusion of ineptness that Ofgem, the OFT and the CMA comprise will be published on Thurs. If they haven’t decided by now to recommend a full-scale CMA inquiry this arm-waving is unlikely to change their minds. The letter from Ed Davey to Ofgem in February gave them very clear direction to be ‘radical’. The Government wants to kick all this in to the long grass until after the general election. It’s the most effective way of shooting Labour’s fox which Ed Miliband has set running to great political effect.

In any event, an inquiry is unlikely to provide any relief to consumers. There are serious jurisdictional issues with DG COMP. The relevant wholesale market is the EU market or, at the very least, the market in North West Europe. In addition, four of the Big 6 are subsidiaries of four of the EU’ Big 7 which are milking British consumers to shore up their damaged balance sheets.

There is a pressing requirement for effective statutory representation of the collective interests of consumers in the areas of utilities (electricity, gas, water, communications and transport) and personal services (health, education, banking and insurance). Consumers of all these services are individualised, atomised, isolated and disenfranchised and are being ripped off systematically. Their anger and disgust is increasing.

But the existing statutory consumer protection bodies have been totally emasculated. They need to be re-established and re-empowered to take collective action cases before sector regulators and the new CMA which should be required to make determinations in a quasi-judicial manner having tested the evidence presented by the consumers’ representatives and by the businesses and agencies under investigation.

But there is no chance of this happening until voters make their voices heard collectively.

Richard says:
25 March 2014

The item on pg 57 of the April Which? mentions smart meters but there is no follow up in your letter to Ofgem. This is a serious omission because I believe that smart meters are a big confidence trick.
1. The chief consumer benefit claimed is to eliminate estimated bills. The average consumer will not benefit materially from having one fitted because the average amount of overcharge due to estimating is relatively small. The smoothing effect and predictability of estimated charges will, in most cases, be helpful to household billing.
2. It is a common misconception that they will save consumers money. Even if one could use the meter to save an optimistic £25 per year it would take 16 years to pay back the £400 initial cost.
3. It is not widely appreciated that smart meters can be remotely instructed by the energy company to cut off supply, AKA selective load shedding. This could be extremely inconvenient for the customer and is of benefit only to the energy supplier in enabling him to reduce generation costs.
4. The cost of the smart meter roll out programme is £12.0 billion, ie about £400 per household which will be paid for exclusively by domestic customers. All the benefits, which include reductions in meter reading costs, will accrue to the energy companies.
5. The experience in the US and other countries is that such systems are subject to hacking (both individual and large groups of customers) which can cause major problems for suppliers and customers.
This scheme, which is enthusiastically supported by government, is clearly deeply flawed and would almost certainly not get off the ground if it was subject to normal financial decision making by the energy companies.

Rosie says:
26 March 2014

If we went back to a world where we knew we were paying a fair price wherever we went, we wouldn’t have to spend half our lives shopping around for the best deals and the nation’s health would be a lot better!

Royston rogers says:
26 March 2014

The standing meter charge is a con every one charges a different price for having a meter.

This is daft.
We should fight to have this scrapped.

Thank you.