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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
Jennifer Kingsley says:
14 March 2016

It’s not the consumer who is fixing the tariffs so why circulate their details to all and sundry so they are bombarded by equally complicated tariffs. We need to know the charge per kW or whatever so there is a standard we can work from to choose

Carolyn Hughes says:
20 March 2016

I agree with Jennifer Kingsley, Not just complicated tariffs sharing customer details can lead to the customers receiving unwanted nuisance phone calls too.

Paul Green says:
14 March 2016

The proposals are as expected inadequate. If I hear another person say ” it’s easy to switch” I will explode. The whole process has been designed to confuse. There may only be 4 tariffs available at any one time, but because they’re altered on almost a weekly basis, without changing the name of the tariff, when one tries to compare the market it’s difficult to identify one’s current plan. This is made even harder by the fact that some comparison websites do not have up-to-date information. As has been said by others, lets have the actual prices per Kwh published along with the standing charges, and we can do the sums!

You might explode then. 🙁 It is easy to use an online comparison site – try Which?Switch, and to then switch either through the site or direct. My experience of the Which? site has been accurate and up to date. If you go to an energy company’s website they will give you the standing charges and unit prices for different tariffs, but it is far easier to do this on a comparison site – it will also put the offers for your particular situation in ascending order of predicted annual cost and make your choice far easier and simpler.

Which also provide a phone service to do this if you are not able to go online.

Energy companies will take advantage of the 3 year olds none change accounts by offering enough less to tempt them to give them the business and still make a decent profit . There also needs to be a unit price for both gas and electric as no one trusts their way of working it out
. Heating and lighting is a human” must” need and continually gambling with the lives of the vulnerable is an utter disgrace in the name of business and these recommendations will only stir the clever bods into thinking of ways it can screw their customers and maintain massive profits to pay the upper management hierarchy who would not know how much it costs them to heat their properties , yes they would , would cost them nothing.

Boyd says:
14 March 2016

We are all missing the main problem with energy tariffs. The big six offer much more than 4 tariffs. Online fixed tariffs are constantly being offered at totally different rates with the same energy supplier, presumably, to encourage new users to switch. If you sign up to one tariff and a cheaper tariff is available with the same energy company then the onus is on you to ask to be switched to this cheaper tariff. Some energy suppliers will even charge you £60 to leave the existing tariff even if you are staying with that supplier. When your fixed tariff comes to an end you are then switched to the standard tariff which is much more expensive if you do not inform the supplier otherwise. In essence to make sure you are on the cheapest tariff you have to constantly monitor these fixed tariffs to make sure there is not a cheaper tariff available even with the same supplier. I find I do not need to switch supplier just the online fixed tariff.

This whole switching nonsense infuriates me. Why is everyone blaming consumers for not switching rather than blaming the energy companies for ripping off loyal customers? The big Energy Suppliers are going the same way as insurance companies – they are only interested in gaining new customers and are not interested in providing good service to existing customers. Everyone should switch to Ebico and stay with them – no standing charges and one simple tariff no matter how you pay (even if you are on a prepayment meter). No special offers for new customers – we all pay the same.

Tony M, I doubt many people will find Ebico competitive. My bill would be a lot higher if I changed to them. They may be OK for very low users however. So where do their high charges end up?

Do people not shop around for many types of things they buy? So why not energy. It is easy to find, and change to, a more advantageous supplier.

Malcom R, Perhaps Ebico may not be competitive for you, but the point is that they are fair to all. Because they don’t rip off customers on prepayment meters the rest of us pay a little more – I am very happy to do that. Shopping around is fine if you have the time and resources to do it but why should those that don’t (usually the most disadvantaged in our society) be penalised in order to subsidise the better off.

Tony M, the last time I looked at Ebico for my area, compared to my current tariff, a low user would pay 42% more on dual fuel, a medium user 53% more and a high user 60% more. I cannot see any argument that makes it sensible to opt for Ebico under those circumstances.

What is fair is that we should all have choice to pick a supplier and a tariff that best suits our circumstances. I don’t see where “better off” and “subsidy” comes into this.

I have said repeatedly in this and other conversations that the disadvantaged and the genuinely needy should be helped, both to find the right supplier and financially where appropriate. This is the job of public services.

pennywise63 says:
15 March 2016

Go with Ebico for gas or electric if you are a very low a user it works out much cheaper than using one of the other suppliers that have a daily standing charge . Being a higher user you would be paying more especially for electric . Ebico is part of SSE.

I completely agree – we’ve all fallen for the idea that it is our fault if we pay too much rather than the energy companies being guilty of greed and sharp practice by making the whole system complicated. Why should we have to keep switching? I shop around when buying something new and large items, such as a new cooker, are not things we buy too often (at least I don’t) – I would prefer not to have to do this for my energy supply. Lots of people don’t have the ability or opportunity to visit websites and comparison sites, and they are obviously disadvantaged. Privatisation of energy has not benefited the consumer, in my view. Strange that state ownership of utilities is fine as long as it is not our own state!

A Harrison says:
15 March 2016

The 4 tarriff rule was brought in to stop companies ripping customers off with dozens of complicated unexplainable tarriffs. Why do we need multiple choices. 4 simple EASY EXPLAINABLE tarriffs with the cheapest price per KWatt is all that’s needed. What we do need is clear and honest information, something we will never get. It’s not in the interests of the energy companies. Confusing customers pays them millions of £’s in profit.
This applies to all walks of life whether it be the Banks, the Government, waste in the NHS, insurance companies, the public are very sceptical of all public bodies in this day and age. Honesty and loyalty counts for nothing.

“Are you on the best off-peak electricity deal? Which? reveals list of economy 10 suppliers

Read more: http://www.which.co.uk/news/2016/03/are-you-on-the-best-off-peak-electricity-deal–435551/ – Which?”

It is very useful of Which? to publish this list of E10 suppliers, and the associated link to storage heaters. However, when deciding upon whether to use E10 (or economy 7) remember that although the night time tariffs are much lower than a normal tariff (around 50%) the daytime tariff will be higher. So you need to look at how much electricity you use in both periods to decide whether overall you will save money. You will, I believe, need to use at least half your electricity at night to make it worthwhile, and you need to look at both winter and summer; you won’t be using much heating if we have a decent summer so most of your consumption is likely to be at higher unit cost during the day.

The CMA proposals seem designed to make the situation worse rather than better. It’s as if they were written by the big six. Here is my response to their proposals:

I am writing about the provisional decision on remedies to reform the energy market, open up competition and help customers get a better deal.
I am shocked at your proposals, almost all of which would seem to make the market even less competitive than it is at present. It reads as if it had been written by the big six energy suppliers.
1. Your proposal to allow price comparison websites to negotiate exclusive deals with suppliers immediately and your proposal to remove the Whole of the Market Requirement in the Confidence Code will both make it more difficult for customers to find the best tariff as they would need to consult all comparison websites to find the best deal. Comparison sites will have a profit incentive to only publish results from the energy companies which give them the best commission. The big six have the biggest marketing budgets and smaller, cheaper suppliers will be priced out of the market. This proposal is anti-competitive.
2. Your proposals to modify gas and electricity suppliers’ standard licence conditions to remove the ban on complex tariffs and the four tariff rule will increase the complexity for consumers. This proposal is anti-competitive.
3. Your proposals to disclose details of customers who have been on one of their standard variable tariffs (or any other default tariff) for three or more years will:
a. lead to untold misery for householders, especially the old and vulnerable, who will be bombarded with sales calls, emails and post to encourage them to switch without having any information on whether the information they are being sent is the best value option or the customer service rating of the company making the proposal;
b. would probably be in breach of data protection legislation;
c. favour the big six energy companies whose marketing budgets will enable them to reach more such householders. This is anti-competitive;
d. not lead to an increase in householders switching suppliers due to the confusion and fear that will be created;
e. fail to achieve the outcome that energy companies should reward customer loyalty with the lowest available tariff (they should be required to switch consumers to the most appropriate lowest tariff unless the consumer opts out).
4. I see nothing in your proposals which facilitates the switching process for consumers. Inertia is mainly caused by:
a. Difficulty for consumers in finding information about their current tariff and current annual level of consumption. Both should be clearly stated on every bill from energy companies.
b. Concerns that the switching process will be slow and stressful and there will be difficulties getting money back from the companies if they are in credit, which seems to happen with monotonous regularity for direct debit customers.
c. The difficulty of finding information on the energy companies’ customer service and level of complaints. Consumers are aware of problems with customer suppliers from friends and neighbours and often prefer to stay with ‘the devil they know’. There is much more that could be done to make the process better.
5. I have not found anything in your proposals I consider would create the ‘perfect market’ situation whereby customers have no need to switch suppliers because they would all be providing the same lowest possible price and best possible service.

I do not think it matters one iota either way we consumers in this country will get ripped of irrespective so it`s not worth searching for a cheap supplier!

Bob Packham says:
15 March 2016

The energy market isn’t about the consumer it’s about the pursuit of profit . Renationalise our utilities, set a fair tarif for all and put all the profits to use for the benefit of all the consumers and not a bunch of shareholders. Stop wasting people’s time with the ridiculous notion that you endlessly shop around for a necessity. It’s a deceit.

malcolm hall says:
15 March 2016

Wholesale energy prices have fallen about 18%. We may get a reduction on gas prices of about 5%.
WHAT ABOUT ELECTRICITY PRICES ?????
What we need to know from all suppliers is the standing daily charges and the cost per kilowatt hour,
not just what an average user will pay. WHAT is An AVERAGE USER?????

Ofgen does not regulate the Big Energy companies who raise price at will. The price of Oil has been $30 per Barrel for 12 months , but Energy Prices stay up. Energy Profits Stay Up. When is Cameron going to help the People and Not his Wealthy Friends?

Last time I looked, no more than a few per cent of the UK’s electricity was generated by oil fired power stations.

Even free oil cannot be used to power a wind farm or a hydro plant or a nuclear plant or even a normal coal station.

1. Those of us who are able to compare prices & change provider can do so BUT WHY SHOULD WE HAVE TO go through this hassle every year?
2. The vulnerable on prepayment meters don’t have either the ability or if in rented rooms (bedsits) are able to change provider. These are the people who seriously need assistance & Which & the regulator should be making them a priority.

There is no reason why we cannot take advantage of competition between companies in the complex production and supply chain, yet sell energy to everyone at the same price. That would not suit those who have no care or interest in anyone other than themselves.

I don’t understand why it is proposed that there is a temporary price cap to protect four million vulnerable customers. I’m waiting for an explanation of why it is necessary to charge pre-payment customers more.

“That would not suit those who have no care or interest in anyone other than themselves.”
I’m sorry wavechange but this kind of statement is quite inappropriate and may well deter contributors who have valid points to make. And, of course, your view may not be shared by everyone.
Some suppliers will be more efficient at operating their businesses than others and make better forward-buying decisions. So if they can supply energy cheaper than someone else, but are forced to set their prices at a higher level to match less efficient suppliers, what does that achieve other than giving them greater profits?

Should all food be the same price – item for item? Should all petrol and diesel…..?

We should be looking at realistic and practical ways of dealing with this market, not going down blind alleys. 🙁

Incidentally, I do care about others – the vulnerable and those deserving of assistance. 🙂

In every discussion about energy prices, the majority are unhappy with energy pricing and we know that a significant number of people are struggling to make ends meet.

Is it a blind alley to have competition in the energy market yet be able to supply everyone with energy at the same price? You may think so, but I believe it is realistic and practical.

Businesses must adapt to the needs of people, not vice versa.

“the majority are unhappy with energy pricing”. If you ask someone whether they would like lower prices – the inference – then what sort of response do you expect? Which is why I want Which? to fully explain energy pricing, something many do not understand.

However my comment was aimed at trying to keep the discussion open to all, whatever their views, and not seek to infer that if you don’t support a particular view one is uncaring and selfish.

As for prepayment meters Ofgem are looking at this with a view to making all tariffs available. Some prepay meters will charge more to recover arrears from people who have chosen (as opposed to those unable) not to make payments on a credit account.

The concern about energy pricing is more than asking people if they would like lower prices. I am not alone in believing that energy pricing is far too complex.

If one of us had a stroke tomorrow we might no longer be able to search out the best price for energy and it might not be long before we were paying more than other users. Why should we regularly have to check prices to ensure that our current supplier has not manipulated prices so that our tariff is no longer competitive?

Assuming that there is no complication of arrears, why should a pre-payment customer pay more than anyone else?

The same comments apply to food, on which we spend far more of our income. If you find an energy package that suits it is unlikely you’ll need to shop around “regularly”.

We should be looking after people who are vulnerable and in need as special cases to ensure they get fairly dealt with. That does not mean that others should not be allowed to search the market for the best prices for anything – energy, domestic appliances, clothing. Choosing the best energy deal for those who are capable is simple.

The vulnerable are often not very good at seeking help. Furthermore, there are many who may not be vulnerable but don’t have a lot of money and it is well established that they are among those paying more than they need to. What may be simple to you and me is not necessary simple to everyone, and many have more important issues to cope with – unemployment, family problems, illness, dementia and so on.

Assuming that there is no complication of arrears, why should a pre-payment customer pay more than anyone else?

I was given the green light this morning to go ahead with my move to a newly built home with an EPC ‘B’ rating which I am hoping will cut down on my energy usage. It is larger than my current home but I am hoping the saving on my energy usage will compensate for the extra council tax I will have to pay and also will make up for the poor interest rate return on my savings.

Friends and relatives think I am slightly ‘bonkers’ to even contemplate such a move at my time of life, but it is a decision not taken lightly and which I have given a lot of thought to and look forward to enjoying my final years in a well insulated and warmer home with cheaper energy bills.

Beryl, , As we would say here “health to enjoy your new home” All the best with your move
Dee

Deekay, congratulations – you made the 1000th comment 😀

Beryl, i don’t know what time of life you are at, but I think it is never too late. I do hope you enjoy your new home with lots more “final years”. You will probably be automatically on a standard tariff and maybe with an energy supplier you would not choose. I’m sure you will look at Which? Switch as a user with average consumption to see what the best deals might be. Suggest you switch direct to your chosen supplier so no commissions are paid! 🙂

Many thanks Malcolm and Dee for the good wishes and energy advice. I must say that was a lovely 1000’th comment.

Paul Wiles says:
16 March 2016

A lot of people can’t be bothered to change supplier and this apathy is what is causing this problem in the first place. Even if you don’t switch say from British Gas to say Scottish Power at least get on the best tariff for the company you are with. It’s easy… one phone call and its done. With a little more effort change supplier. I’m not keen on yo-yoing between companies 3 or 4 times a year but I have changed tariffs on 2 or 3 occasions in one year. I’ve saved a lot. Those that never change and stay on the same deal for ever are either stupid or wealthy.

I would like to see a scheme introduced where people of pensionable age receive free help to select a better/best deal. The thought of an elderly person living on their own and resisting turning on the heat in winter because of the cost saddens me in the 21st Century in Britain. It should not happen.

Cynically, I never expected CMA’s actions ever to come close to addressing the problem. Sadly, I’ve been proved right.

T Morris says:
18 March 2016

I’m on a pre-payment meter a temporary price cap is pretty pointless, how temporary. Temporary until they get back to making us pay extra for paying up front? Agree with others comments I don’t want my details circulated to these companies so they can bombard me with glossy pieces of nothingness telling me how all bells and jingles their electricity is!
As I am on a pre-payment meter you can never get an answer on price comparison sites and they seem to take ever longer process the Energy Rebate which means that you can’t leave supplier until it’s sorted seems to be taking up to five months between applying and receiving so yet another scam.
It’s much to little and we have been waiting far too long for Energy companies to be effectively regulated. Obviously light touch isn’t working for anyone but the Energy companies