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Government announces £50 off our energy bills – is it enough?

Coin on gas flame

Four days ahead of the Autumn Statement, the Government has announced proposals it says will save the average British household £50 on their energy bills.

We’ve long been calling for sky rocketing energy bills to be brought under control. The message seems to have gotten through to the Government. Today Ed Davey confirmed that they would take action by cutting back on the levies we all pay for on our bills.

The Warm Home Discount will still be available for vulnerable households, but the cost of this will now be met by the Government via a rebate on your energy bill for two years. Changes will also be made to the Energy Company Obligation (ECO), an insulation scheme, so that it can be delivered more cost-effectively. These are both changes we’ve been calling for as part of our ‘Cut them down, George’ campaign.

As we discussed last week on Which? Conversation, it’s right to refocus the Energy Company Obligation so that it gives greater priority to low-cost measures, such as loft and cavity wall insulation. But the suppliers must now commit to greater transparency and to getting their costs down, fast.

The Big Six make promises

All of the Big Six energy suppliers have confirmed that they’ll pass these savings on to their customers. British Gas, for example, will cut its gas and electricity prices by 3.2% in January 2014 for an average dual fuel saving of £53. Although this does follow its price rise of an average £123.

EDF and Npower have said they won’t increase prices before 2015, except if wholesale prices go up. Npower will also seek to reduce the 10.4% price rise it implemented over the weekend (EDF hedged its bets by announcing a lower 3.9% rise). SSE and Scottish Power have said they’ll pass on the full £50 saving. And Eon, which hasn’t announced a price rise this year, said the government’s changes will mean their customers will pay less next year than would’ve been the case.

We still need major reform

It’s about time the Government started getting the cost of energy under control and this is a welcome step in the right direction for everyone who’s struggling with the increased cost of living. But, ultimately, bills are still rising.

This is why we’re still calling for major reform of the energy market to make it truly competitive. We also need to see a comprehensive review of the Government’s energy efficiency policies. And any other policy costs that are passed onto our bills, be it smart meters or the carbon floor price, must be rigorously scrutinised and kept low.

What do you think about the Government’s proposals to cut bills by an average £50? Will they make a difference to your energy budget?

Comments
Member

If the report in today’s Independent paper is accurate then there is a real spat going on between Government and Ofgem. My view is that no-one has either thoroughly investigated the way the market works, nor put figures in front of us that we can challenge to see what really happens in this market. We need a properly informed discussion. This is where Ofgem should be contributing facts to us, but don’t. So I have little sympathy for their position but wonder how impartial the report is. Politicians and newspapers …….? Incidentally, as the “Big 6” are not the highest chargers in the market, we must also question the profitability of the others.

Extracts from the report:
Senior ministers have made it clear that unless Ofgem takes swift action to improve competition and curb the profits of the “big six” energy companies, then the future of the regulator itself will be called into question……………
“Ofgem was set up to regulate the market and protect consumers from being over-charged for their gas and electricity,” said a senior Government source.
“But it is quite clear that in recent years it has lost sight of this objective. There is obviously a problem and Ofgem must resolve it. We are optimistic that they will but this is last chance saloon.”……………..
In theory it is up to Ofgem to regulate both sectors of the energy market to ensure there is adequate protection for consumers and that the energy companies do not make excessive profits.
But ministers have become increasingly concerned that the regulator, which is independent of Government, has become too close to the industry and has failed in its duty to consumers.
While it cannot dictate what Ofgem does, the Government ultimately has the power to scrap the regulator and bring market regulation back into the Department of Energy and Climate Change.
One senior official said: “Ofgem have been a nightmare for years. They keep Government in the dark about what they’re doing and then spring things on us at the last minute – usually at 3.30 on a Friday. There is not much sympathy for them in Whitehall.”
Another political source said there was frustration at Ofgem’s inability to explain what it was doing to protect consumers from excessive price rises. “I think there are some good initiatives going on around price transparency and making it easier for new entrants to come into the market, but Ofgem has been totally useless at explaining this to the public.”

Member

Maybe there is some action. Ofgem have published this today:

“Chief Executive’s response to The Times article published on 3 February

Publication date
Monday, February 3, 2014 – 17:15

Dear Sir,

Following the article ‘Energy chiefs lash out as Ofgem looks into trades’ (3rd February) I would like to make clear that Ofgem and the Office of Fair Trading (OFT) make no apologies for asking energy companies to provide the right level of information to assist with the first of the annual assessments of competition in the energy market. At a time when suppliers need to restore trust in the energy market it is important that these companies comply with these requests rather than sniping at the regulators for doing their job. Ofgem and the OFT take a proportionate approach to gathering information and we have not asked for information on every single trade. However, no one should be in any doubt that we will not hesitate to acquire the information we need for our review.

This is a wide ranging review looking at how well competition in the markets for gas and electricity is serving the interests of households and small firms, and we are carrying it out with the OFT and the Competition and Markets Authority (CMA). Energy companies were required to provide us with the information we requested using powers in the Gas and Electricity Acts, and have now done so.”