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Are the CMA’s energy market changes enough?

Question mark light bulb

The time has come. After two years investigating, the Competition and Markets Authority has given its final verdict on the energy market. The million dollar question is; will the CMA’s proposals deliver fairer energy prices?

We’ve been urging the CMA to take a hold of the energy market and deliver changes that would finally fix an industry that sees millions paying over the odds.

We’re backed by more than 360,000 of you, and so last week we sent a dossier to the regulator rounding up the views of those affected by high energy prices. People like Gemma:

‘Everybody should be able to keep themselves warm – it’s awful in this day and age that the vulnerable and those on low incomes can’t afford to properly heat their homes.’

At the same time we asked you if you were confident that the CMA would deliver fair energy prices. An impressive 11,000 of you voted, and only 7% of you said ‘yes’. A resounding 76% said ‘no’.

The regulator certainly had a lot to live up to, so how has it done?

The CMA’s proposals for the energy market

The CMA points out that 70% of the Big Six’s customers are on the most expensive standard deal, adding that customers are paying £1.7bn a year more than if there was a competitive energy market.

So here are some of the proposals the CMA has set out to resolve this:

  • An Ofgem-controlled database of customers who’ve been stuck on their supplier’s default standard tariff for more than three years, allowing rivals to contact them with better deals. This will be subject to strict safeguards on communication so that you can opt out at any time.
  • A temporary price cap to protect the four million vulnerable customers on prepayment meters, which would reduce their bills by a total of £300m a year.
  • Strengthening the ability and incentives for price comparison sites to help customers find better deals by giving them access to relevant information like customer meter numbers and allowing them to negotiate exclusive deals with suppliers.
  • Removing the four tariff rule, which the CMA says limits competition and innovation, and therefore allowing suppliers to offer deals designed for certain customer groups.

Our verdict on the CMA’s proposals

It’s certainly right to ensure that vulnerable customers on pre-payment meters are protected, but there are lots of customers who are struggling to pay their bills who won’t be helped by this price cap.

Releasing customer data to rival suppliers must also be strictly controlled so that it actually helps customers switch to better deals and doesn’t result in more unwanted nuisance sales calls.

There’s still clearly a long way to go before we’ll have an energy market working for all of us. It’s now time for the energy suppliers to stop resisting change and start working harder, and together, to restore trust in the energy market.

Your verdict on the CMA’s announcements

Now we want to hear from you. Are you pleased with the proposals announced by the CMA? Are they what’s needed to reform the energy market? Do you think they’ll make a difference to you and your family? Vote in our poll and then share your more detailed views in the comments below.

Do you think the CMA’s proposals are enough to fix the broken energy market?

No (92%, 25,741 Votes)

Don’t know (4%, 1,188 Votes)

Yes (4%, 1,016 Votes)

Total Voters: 27,945

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Useful links:

The CMA’s energy market investigation – summary of provisional decision on remedies (PDF, 679KB, 46 pages)

Comments
Profile photo of malcolm r
Member

Smart Energy GB – who are they? Well. they say “Smart Energy GB is the national campaign for the smart meter rollout. We’re independent of government………….”. Yet last year it is reported that “Energy Secretary Amber Rudd ( isn’t she “governemt” ) refused to support the reappointment of Baroness McDonagh, the inaugural chairman of Smart Energy GB.

Anyway, my attention was drawn to them by a full pafe ad in today’s DT. It says, in support of smart meters, things like
– you can work our what’s cosating you the mst money and change your habits
-power-heavy home appliances can be pinpointed and any unnecessary energy offenders identified, meaning that your household will become more cost efficient
-….so you know where to make changes to suit your budget.

It is as if we use energy in a discretionary way. Our heating has a thermostat and timer to control what we need and when. A washing machine, tumble drier, dishwasher have predetermined programmes that decide the energy they use. The fridge freezer uses the energy it needs automatically. We could have fewer cups of tea and watch less tv – watch the smart meter instead. But I must wonder at calibre of the people who write and apporve this kind of stuff.

Which? tells us most UK citizens are quite unable to work out who their best energy supplier might be – because it involves multiplying two numbers together and adding a third. If this were true (and I do not believe it) then how many are going to sit at their smart meters, check what their consumption is, see what appliances are on, do this regularly on cold and hot days, and………….work out how to make changes to their budget?

I’d rather the money they spend on advertising, let alone smart meters themselves, went instead to vulnerable consumers who genuinely need assistance.

Profile photo of malcolm r
Member

Dear oh dear. Awful spelling. I’m sorry. Please replace with government, page, costing, most, approve. Hope that’s it. My only excuse is I was in a hurry to watch the snooker – fascinating this year. I expect you could work out what I meant. 🙁

Member
schweitzer says:
3 May 2016

Don’t worry about typos, what you say is spot on. And that is not the only worry about smart meters. There is more to them than we are told. As with other smart things, smart TVs, smart phones, etc. they have a lot of technology that compromises our privacy and sends more information than we know about back to whoever runs the system. It sounds paranoid but the truth can sound paranoid these days.

We once thought mass surveillance was science fiction, yet the reality was planned decades ago. New snooping laws became necessary because of the imminent security threat but the new legislation turned out to be legalising what had been happening for years.

Most necessary changes have two reasons: the one that sells them to us and the other one that serves the interests of our leaders.

Profile photo of Wish
Member

Why can’t the problem of insufficient numbers of customers changing supplier due to confusing charging be fixed by the simple expedient of scrapping all standing charges?
If every supplier’s tariffs were expressed simply in terms of cost per Kwh ….. then comparisons would be delightfully simple and transparent.
£0.14 per KWh is obviously a cheaper tariff than £0.17 per KWh.
Confusion (even for those of us with a Maths degree) only really arises when variable standing charges are added into the price mix. In my view this has been a deliberate strategy adopted by the big energy suppliers in a (successful) attempt to bamboozle customers.
Comparing even just two tariffs ……. one at £0.14 per KWh with a standing charge of £0.31 per day …… with another at £0.16 per KWh and a daily standing charge of £0.26 is impossible for most mere mortals ….. even with the aid of a calculator.

Profile photo of malcolm r
Member

Abolishing standing charges would penalise those people who, of necessity, use more energy. They may be elderly, in all day, larger poorly insulated houses, even on electric-only supply. It would be unfair to add even more to their already-high bills. Standing charges do represent a certain amount of the fixed costs in your bill, and also add to the variety of tariffs available to suit different types of user.

As for complexity, that also derives from 40 suppliers all with different offerings. But if you haven’t tried it, make your choice simple and easy by using Which?Switch. Put in your postcode and expected annual usage and you’ll get a huge list of annual costs, starting with the lowest. All the work is done for you; just make your choice.

Profile photo of wavechange
Member

Alternatively, the heavy users may be rich and/or wasteful, like my neighbour who went away with the family for three weeks and left the boiler running. That was July/August and not the middle of winter.

Anyone who has a genuine need for additional heating should apply for benefits.

Profile photo of John Ward
Member

I agree that tariffs with standing charges could be one of the available options but I think the supplier should have to declare what the standing charge comprises and how it is made up. Alternatively Ofgem could set standard standing charges for each area if there is any need to reflect different cost bases.

Profile photo of malcolm r
Member

I agree that standing charges should be based on the real fixed costs. However, the governments extras (taxes apart from vat) added into your bill complicate there calculation. If variable costs were, for example, raw energy, transmission costs and fixed costs included distribution and connection maintenance (all benefit), admin, smart meters or meter reading (same for all) then we could have more rationally based bills. We have a similar situation if you are on a water meter – a standing charge plus consumption.

One good reason, in my view, for recovering fixed costs through a standing charge is that in a particularly cold winter, for example, excessive fixed costs are not recovered through higher energy use (which is one of the downfalls of the ill thought through petrol pump pricing proposal)

Profile photo of malcolm r
Member

People who want to waste energy (I wonder how many are like your neighbour – do you know they are rich? Perhaps they will confess) will pay heavily for it through energy charges. No different to people who drive a lot, have gas guzzling cars, or use too much water. But I suggest the vast majority are careful with their consumption and use only what they need to. Some need to use significantly more than others. Some “rich” wealthy working couples in well insulated homes, out all day, are low users. I don’t see why an unfair pricing structure should subsidise them. So pay what it costs and avoid indiscriminate cross subsidy.

But all this simply proves the point that energy usage is not necessarily related to wealth. And I’d rather be in a position where I only needed little energy rather than having to spend a lot.

Please also bear in mind that many users are not entitled to any benefits, however much energy they have to consume.

Profile photo of malcolm r
Member

Ofgem: “In August 2016, Ofgem published a number of consultations setting out proposals for implementing various CMA remedies. These included: (i) Proposed changes to rules around tariff comparability and marketing; (ii) Whole of Market remedy and Confidence Code review; (iii) Prompting greater consumer engagement; (iv) Future of Retail Market Regulation. ”
Consumer groups and charities workshop
This workshop was set up to discuss these proposals further with consumer groups and charities.”

The minutes of the meeting:
https://www.ofgem.gov.uk/publications-and-updates/minutes-consumer-groups-and-charities-workshop?utm_medium=email&utm_source=dotMailer&utm_campaign=Daily-Alert_06-04-2017&utm_content=Minutes:%20Consumer%20groups%20and%20charities%20workshop&dm_i=1QCB,4V9H9,F31FFV,IEW81,1

“Which?” seem to have been one of the participants. The minutes indicate an overall positive attitude to the Ofgem proposals. Does this represent Which?’s view? There was no reported major dissent and, if not, presumably Which? are fairly content.

It would be useful if Which? kept us up to date with progress like this through the relevant Convo so we can see what is developing.