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A damning indictment o​f​​ ​the energy industry

Energy prices up

Millions of us are paying more for energy than we need to – that’s what a long-awaited investigation into the industry has found. So where do we go from here?

This morning the Competition and Markets Authority (CMA) has published the provisional findings of its year-long inquiry into the energy market – and possible solutions to the problems.

It’s a damning indictment of how the market is failing customers – with British households overpaying by around £1.2 billion a year and ​most consumers ​not switching to get the best deals. One in three had never even thought about switching.

What the CMA’s energy report says

The CMA found that the biggest suppliers have taken advantage of millions of households – who have at the same time been hit with the costs of government energy policy.

And the CMA found that tariffs offered by the big six energy suppliers – who have around 90% ​of the ​market between them – were around 5% higher than they should be between 2009 and 2013.

So what does that mean? For the average household it means they now spend about £1,200 each year just on energy. And for the poorest 10% of households, energy bills now account for about 10% of all their spending.

How can the problems be solved?

Among the solutions the CMA has suggested is a transitional ​regulated tariff while reforms are made to the energy market.

Our executive director Richard Lloyd said:

​​‘Now that we have a clear, official assessment of what’s wrong, we want the regulators to work with consumers to make sure their reforms will be effective this time.

‘In the meantime it’s right to put in place strong extra protection for consumers who don’t, for whatever reason, get a fair and competitive price. We also expect the big suppliers to quickly put in place changes that will bring more transparency and competition in the wholesale energy market.’

We’ve been highlighting the failures of the energy market for many years and welcomed the decision of the regulator, Ofgem, to refer it to the CMA​ last year​.

More than 200,000 people have backed our Fair Energy Prices campaign, calling for simpler and fairer energy pricing.

What do you think of the CMA’s findings? Have you switched provider? If not, are you happy with your current provider or has something stopped you switching?

Comments
Member

John, the advantage to my mind of Ofgem running a PCW is it should be free of any commercial pressures, show results for all tariffs and all suppliers and be seen to be impartial. Using a PCW where you simply put in your annual consumption and address makes finding your lowest cost providers simple – no calculations to perform. PCWs should be available on the phone as well for those who cannot or do not wish to use the internet. Which? has this.

They then need to publicise widely the simplicity of change with significant savings for those who have never been able to or who have never bothered to change tariffs or supplier. I’m not sure how far you can force people to save money.

Member

I agree Malcolm. I should have made it clearer that I support the idea of a non-commercial, supplier-neutral, Ofgem-operated PCW and have no concerns about this type of facility coming between the customer and the suppliers as it would lubricate the market not constrain it. .

I think your comments on publicising the simplicity of switching tariffs and switching suppliers. One possible barrier to switching is the need for customers to have their annual consumption figures to hand when they want to look up alternatives. There is no technical reason why this data could not already be captured by the comparison system if Ofgem ran the site, and subject to certain security ID protocols and home address details, could calculate and present the before and after monthly charges. I would have reservations of commercial companies having access to this data as there is a risk of misuse and marketing abuse. We could approach a position where there is a private sector supply side operating within a a public sector-operated [rather then merely regulated] market place securing the benefits of competition without its excesses and adverse effects.

I can’t let this pass without again calling for the government to cut back the overhang of levies, charges and ‘obligations’ that have climbed all over the trellis work of energy pricing. We will not get simplicity in pricing that enables easy switching until this is done. Understandably, but not acceptably, there is no reference to this in the correspondence between Ofgem and the CMA.

Member

Second paragraph first sentence should say “I agree with . . .” instead of “I think . . .”.

Member
John says:
8 August 2015

There are two factors which apply, which I do not think many others have mentioned.
Firstly, I believe many consumers have stayed with British Gas largely through inertia but also because they mistakenly think they are acting out of nationalist or patriotic sentiment. Buying British – as they see it – despite the fact that most informed people are aware that since it became privatised it is now in the ownership of foreign companies.
British Gas are fully aware of this, which is why they consistently maintain high prices, always ready to increase their energy prices whenever the spot oil price goes up but never reduce their prices when oil – as now – is at an all time low of under $50 – more the half the price historically.
Secondly, the truth is that energy still remains relatively cheap, especially for those who opt for joint supplies of gas and electricity on a paperless billing basis and monthly standing payments.
The cost of energy has steadily crept up to levels thought unimaginable a few years ago but it has been such a gradual process that it has still not fully registered in the minds of most consumers.
Inertia and unawareness on the part of consumers has been the energy companies’ best friends.

Member

I have watched the discusions on the electricity tariffs and can see that the companies have managed for the consumers to be divided so that they can continue to be over charged.
It would be better for the all the consumers to agree on one type of tariff, even if half did not realy want that type, it might then force a change
I would suggest that the most simple is adopted, that is x pence per kWh (no standing charge) and an off peak tariff of y pence per kWh during the day and a reduced price of z pence per kWh for the night period. No other prices, discounts, charges etc. allowed. The method of payment to be cash over the counter, cheque, direct debit and pre payment, etc., all at the same tariff.
Inaddition all ‘green’ charges, obligations and restictions on coal fired power stations, subscidences on wind generation and commercial solar power to cease.The ‘renewable’ wind and solar power has been shown to in crease pollution due to the need to operate conventional plant at part low load to back up the sudden variation in wind and solar.
OFGEM to be given the power to fix the tariffs twice a year

Member
John Kusz says:
17 August 2015

This is exactly what I would like to see in the energy market, as before privatisation every one paid the same price per unit whether it was gas or electricity, and as for the useless politicians lack of political will to tackle this problem, could it be that they are hoping to get directorships in these companies when they get kicked out of power, for looking after these companies when they had the power to do so? You do not need a degree to see the energy companies are in a cartel to screw the public for as much as they can get away with

Member

Hit the nail on the head. It is illegal to run a cartel, but they think that working people are to dumb to realise thats just what they are doing.
And just like the Banksters they get over inflated bonusses.

Member

Nationalise all of them and then will be the same price per unit or kw

Member

One thing I would like to see are the figures they use to set prices. Give us some clarity on how much the oil/gas etc costs to generate the electricity/gas we use.

Member

Why not nationalise gas and electricity and run them at cost price therefore the consumer would save lots and then spend the savings in the UK therefore boosting the economy…..but no, nobody gets rich that way so that’s not gonna happen is it lmao

Member
Parker says:
20 September 2015

Trouble is John that nationalising them would cost so many millions to actually do that the price you would then pay for energy would probably go up just to pay for it!!

Member

Just changed to first utility from Scotty power to save approx 20%. before that changed from edf to scotty power to save money. Tariffs are too complicated as standing charges come & go so waht are ofgem doing about this. Nothing so how do they justify their existence!!!!!!!!!!!!!!!! With oil prices falling why is electricity rising perennially. OK so gas plays a part but coal should be used more & stuff all this global warming rubbish. Most is El Nino

Member

Scottish power customer. They change computer system Aug 2014 , did not tick box to collect direct debit from my account. Come April 2015 relize I had not paid a penny. Tried to sort them out in April & June 2015 ( I failed & so did they ). Just ( I Hope) sorted them out Sept 2015. How can a company be so inept .

Member

I can certainly agree that Scott Power is abysmal – its customer relations / complaints handling ( endless acknowledgements but no really focused or personal letters about your specific complaint ) , its online meter reading service [ rarely works ] , telephone meter reading service [ rarely works ] ..etc. all are wholly useless – the old nationalised monopolies like British Gas and the Electrical boards were also dreadful but privatisation was supposed to improve matters ….! No such luck .

Member
david hind says:
17 September 2015

Moved to my new address on the 15/12/2014 which had scottish power pre payment meters.My first thing to do was change them to credit meters and also transfer my account to EDF.Now this is not a complaint about EDF they have tried everything to transfer me as a customer.Electric transfer has been completed,but gas is still on the go,what a nightmare Scottish power is,they are worse than any business i have had to deal with in over 50 years !!!!

Member

Nationalisation of the energy companies is back on the political agenda now. It is a delusion that everything that we now moan about would be corrected overnight. Leaving aside the mechanics and economics of actually de-privatising the companies, many of which are now under foreign control, it would create a bureaucratic behemoth – because presumably we would not have area boards like the previous nationalised structure where every household in the same region bought its gas or electricity from the same organisation. There would either be one vast nationwide authority supplying everyone at a single universal tariff or a set of competing state-owned. organisations doing roughly what the present distribution companies do now but less efficiently and less economically. The old gas and electricity boards, and the other administrative apparatus that hung around them, were notoriously inefficient and backwards-looking in their service delivery and their customer service. [The gas boards were more concerned about selling spent coal as coke than they were about making sure people had safe, economical and modern installations in their homes!]. Today we would expect better management and a more commercial approach but the old ways of nationalised industries would soon creep back in and the price of energy would rise again, unrestrained by any competitive pressure. On top of the nationalised supply authority(ies), there would need to be a strategic structure for the generation of electricity and for the import of gas; the notion that these organisations would not get mired in political controversy is unsustainable – the present situation is bad enough. In the whole set up I can think of only one saving: abolishing Ofgem, but DECC would presumably mushroom to compensate. At least today nobody has to stick with their present supplier, and even where there are exit penalties, they are not prohibitive.

I don’t think the tariffs for gas and electricity pre-nationalisation were ever equal “per unit” or for equivalent calorific value. Gas was priced per thermal unit but electricity was priced per kWh, and there were standing charges – quite regressive in some cases. Heating the home by electricity was always much dearer than using gas. Obviously, the chargeable unit values can be tweaked to make them equivalent but that would result in a gross distortion; at some point the input cost of the energy from the generator or importer has to be reflected in the output price.

I think if the government interventions on the consumer cost of energy were stripped away, energy bills today would bear fair comparison [in real terms] with how they were at the time of privatisation and might even be somewhat lower.

Stuart Capel says that coal should be used more. I don’t know why. Three massive coal burning generating stations will be closing down next March and Didcot closed down three years ago. Others will shortly follow suit, and Drax has converted two of its six generating sets to biomass and will no doubt continue to replace coal as the main fuel. There will soon be no deep mined coal production in the UK and UK opencast is not economical in the global market where it is cheaper to exploit and ship it in bulk from other other countries. With a £50 per tonne levy on the use of coal, which has a market price of £35 per tonne, the future for coal is negative.

Member

It’s hard for me to imagine how bad Scottish Power and Npower are. I do not have a gas supply, and I buy my electricity from Co-operative Energy, as does my son. Our experience of Co-operative Energy has been, and remains, terrible, yet they are ranked much better than Scottish Power and Npower.
I believe there should be a fundamental restructuring of tariffs, so that the poor on prepayment meters are not subsidising the rich, who can afford solar panels.

Member

38degrees has just suggested switching to Good Energy, which is Green. From reading Caroline Lucas MP’s book “Honourable Friends?” about her first term at the House of Commons, I understand that Brighton Pavilion, her constituency, already subscribes and receives Green Energy. Is it possible that we can also tap into this environmentally positive energy? Isn’t it about time we could all plump for this?

Member

I moved into my property almost a year ago. NPower are my electricity suppliers but I am getting absolutely nowhere with them. I have last count of how many times I have telephoned them but to no avail. They have read my meter twice now but still keep sending bills in the previous tenants name. I have asked them time and again to sort things out and to also send me a payment card that I can put money on each week. They say things will be corrected within a week to ten days, and guess what STILL NOTHING I have had enough now.!!!!!!!!!

Member
Anthony Wilson says:
19 September 2015

Its clear the industry needs to be re-nationalised. No one should have to worry about heating there home in a cold country like Britain. Foreign firms should not be allowed to invest in our utilities, its interesting that lots of European countries dont allow foreign investment. If the current system is so great why is it unfair and only working for the companies. I dont think expecting people to shift provider every 12 months is the way it should be, its hassle, they dont play fair and the government colludes with them.

Member

I am not sure how a change of ownership from private to public will change the cost of heating. With utility company profits running at around 3% a nationalised industry would very soon be costing consumers more through the lower efficiency and higher cost base of the public sector. Moreover, taxpayers would have to pay more [or other public services would have to be curtailed] if subsidies were introduced to avoid people having “to worry about heating their homes in a cold country like Britain”. The best way to help poorer people and people with higher heating bills because of property condition or continuous heating demand is to take the government levies away from energy bills and charge them to general taxation. At the moment these impositions bear disproportionately heavily on those least able to meet them. We don’t need nationalisation to sort out that anomaly.

We have been with E,On for gas and electricity for three years. It is foreign owned, it provides a good service, it communicate well with its customers, it deals with enquiries promptly and courteously, it advises tariff changes in good time, it provides information on the most favourable rates and terms and provides quick, easy and free transfers, and over that time there has never been an advantage from switching to a different company. Would a UK State Energy Authority offer a better service at lower cost?

Member

We should strip out all the government-imposed add-ons in our energy bills – they amount to around 15% of what you pay for electricity and 5% of gas. Subsidies and benefits to the vulnerable should be from taxation , not from energy companies (that is, all of us customers). These also seem subject to vat – a tax on a tax.

Member

Scottish Power took over my electricity supply without my permission and in the last 8 months taken nearly 2 years of money from my bank account. Which you would think was bad enough but I was unemployed up until four months ago so they left me with nothing to pay the mortgage and fed my two year old son, I have had no help from the Ombudsman and don’t really know where to go next.

Member

Nationalise!
Yes, we can.

Member
John Mitchell says:
22 September 2015

Standing Charges should be abolished. It was OFGEM who allowed and even recommended them in its last report.
Why should you pay for something you may not use? People who have a holiday home or static caravan they only use half the year, or a workshop or garage with a separate meter they use intermittently. You’d be appalled if the fuel companies had a daily standing charge to cover their distribution costs in addition to paying at the pump. Or your local supermarket made you pay a standing charge in addition to when you bought your groceries. Why let the energies companies get away with them?

Member

I like many people are struggling so much financially I’m currently out of work for health reasons but am facing eviction in 2 weeks, I’ve been asking for help for so long and I’m not getting anywhere. I’m a Brit born & bred, if I were a immigrant I’d be in a mansion with everything paid for… Where’s the sense in that??? I’ve worked all my life, I love this country but things really need to change to help us people in desperate need.

Member

When I first signed up with dual fuel with British Gas I was guaranteed no standing charges which was good, I think. It was recommended that I join the new tariff where prices were guaranteed no price rise for 1 year, even if prices increased. But if prices fell, we were also guaranteed that our costs fell accordingly. However it wasn’t explained that I would lose my No Standing Charges guarantee. Also, I am on pre-pay meters whereby I pay more than standard metered customers. I think that this grossly unfair when you consider that we do not incur costs of reminders etc; Surely it would be fairer that we pay LESS, not MORE!

Member

I thought we lived in a democracy where people decide what’s right and wrong. Clearly the powers that be only care about filling their pockets and don’t really care about the dear old lady who froze to death because she couldn’t afford to buy energy. It’s a dog eat dog world. The utility giants don’t care about us. They just want to maintain their profit margins at our expense. The government doesn’t seem to care. If they did then democracy would have sealed the long overdue fate of the few filthy rich individuals who exploit and extort from the everyday person who is simply trying to get by, day by day. The rich and powerful rule, always have, always will so.

Member

“I thought we lived in a democracy where people decide what’s right and wrong”

Not really; almost every government is elected with fewer than 50% of the votes cast. That’s because of our voting system. We had the chance to choose a form of proportional representation – exactly what the Scots and Welsh have – but we rejected it, mainly because voters were swayed by a lot of misinformation.

Member

With world oil prices going down,with the industries workers wages falling because of inflation ( that is no pay rises , or rises below inflation ) how can they justify price increases !
It seems to me the wealthy just want more and more wealth ,just as it was pre ww2. We are most certainly heading in that direction. Unfortunately young people are not interested in our social past as paid slaves,so are completely unaware of what is coming.

Member

Michael, you may be right about oil prices vs energy charges, but UK inflation is currently close to 0% (June 0%, July 0.1%, August 0%) while average weekly earnings have increased by 2.8%. A real gain.

I do not understand why economists don’t like zero inflation. To my mind it can only be good – why should we relish price increases? In particular it keeps prices and wages in perspective. No longer would we have wages and salaries increasing in a spiral simply because prices increase – in the same spiral because labour cost increases contribute to price increases.
Perhaps an economist out there could explain – i’m sure I am missing something simple.