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What can the government do now to help with energy bills this winter?

Turning on the heating

It’s now three months on from the biggest inquiry into the energy market since privatisation, so as the colder weather starts to set in Which? has set out some ideas for the government to help on energy before the winter bites…

The Competition and Market Authority’s (CMA) two-year inquiry clearly revealed how the energy market isn’t working, particularly for those with prepayment meters and customers who remain on the big energy suppliers’ expensive standard tariffs.

After years of price hikes, dire customer service and falling levels of trust, it’s clear that big improvements are needed. The CMA’s proposals to try to tackle these failings will inevitably take time to test, get right and then introduce.

So the energy regulator, Ofgem, will need time and space to introduce the inquiry’s reforms. But still there’s plenty the government can do now to help those who will struggling with their energy bills this winter.

Helping energy bills

It’s time for the government to be turning up the heat on energy company bosses. With 70% of energy customers sat on poor value so-called ‘standard’ tariffs, these energy companies should be genuinely competing to win and keep their customers, getting them engaged and switching to better deals, all the while delivering a much higher standard of service.

Indeed this was one of the inquiry’s recommendations, but the energy industry shouldn’t be waiting for the regulator to force them to do it. It should be doing it now.

The government should also be holding Ofgem to account for the reforms it introduces. Which?, like many others, is sceptical about whether ideas like an energy database to share customer details and prompt switching can bring about real change.

Just introducing these remedies isn’t enough- what we need is for the regulator to explain what good consumer outcomes look like and put in place metrics to measure progress towards those outcomes.

The government should ​be pressing Ofgem to regularly set out whether the new reforms ​are succeeding and deliver​ing​ a competitive energy market​ that ​not only ​doesn’t harm consumers but actually meets ​their expectations​ of the energy industry​.

Beyond this, the government ​may want to do more to help ​vulnerable customers who won’t benefit from the protection ​that’s going to be introduced ​for prepayment meter customers. But the government must think carefully about the impact any further intervention would hav​e – further help ​will come at a cost, whether paid for by taxpayers or out of other people’s energy bills, so it must be controlled​ and not end up hurting energy customers more than it helps them​.

Next steps for energy reform

In truth, this is the last chance saloon for the energy suppliers. It’s the energy industry itself that now needs to rise to the challenge. It cannot think that it’s got off scot free from the inquiry. It showed we’re collectively overpaying £1.4bn due to a lack of competition.

So unless energy companies prove they can genuinely compete for customers and give them a better deal, there will be no one to blame for further intervention than themselves.

Do you think more can be done to improve the energy market? What more could the government do to help you with your energy bills?

Comments
Member

The government could help consumers by banning energy suppliers giving various incentives to their customers when it would make sense to simply lower prices. My current supplier gives me Tesco Clubcard points. Every little helps to make it more difficult to compare suppliers.

That is a change that could be introduced promptly.

Member

Given that they have to ‘buy’ the points from Tesco , and that many will not be redeemed, it’s a cheap way of appearing to give a discount. Anything that obscures the price should be outlawed. It’s also a perverse incentive where reducing energy consumption should be the priority.

I also believe the calculations that support items like standing charges, dual-fuel discounts, paperless billing, direct debit and other elements should have to be lodged with Ofcom for verification. As we have seen in any market where a comparison website can survive, ‘wriggle room’ exists for the exploitation of customers.

Member

Discounts for dual-fuel supply, paperless billing and paying by direct debit could be standardised across the industry, which would help consumers make comparisons.

Member

That’s right, but there is an argument for dual-fuel being a percentage rather than a certain value because it is based on economies of scale for the supplier [or should be if there were any fairness in the system].

Member

The costs of these will depend upon the supplier. I’d prefer to have them set their own costs.

Member

I don’t disagree with that, Malcolm, but I should then like to see the basis for these elements submitted to Ofgem for validation. This is because the basic price comparison is based on consumption data and the closer that is to reality, and not obscured by peripheral costs and discounts, the better.

Member

I agree. I believe largely in paying what it costs, without indiscriminate an unfair cross-subsidy.