With last week’s news that the new energy price cap will come into force this winter, our guest, Claire Perry MP, explains the government’s approach to improving the energy market for consumers.
Energy bills make up a large part of families’ outgoings, with households on the lowest incomes forking out more than 8% of what they earn on gas and electricity.
That’s a considerable strain on household finances and it’s made worse by market failures. In 2016, the Competition and Markets Authority estimated that customers of the ‘Big Six’ energy suppliers paid on average £1.4 billion per year more than they needed to.
It’s great to see the number of suppliers in the energy market has rocketed to more than 70 from just 12 in 2010, meaning more choice for consumers. The government has encouraged households to switch supplier, with nearly one in five switching in the year to May 2018.
While this is encouraging it means far too many people are still paying more than they should. Millions of customers on poor value deals are paying over £350 a year more on bills than if they shopped around and switched to the cheapest tariff available.
I know many of you feel strongly about this issue, more than half a million people backing Which?’s campaign for fairer energy prices.
Unfortunately energy suppliers do not reward loyal customers as they should.
Putting consumers in charge
The government is intervening to protect the most vulnerable customers, and we’re beginning to see real improvements across the industry.
New technologies, such as smart meters, are making it easier for consumers – particularly those on pre-payment meters – to keep track of their energy use. And more than 12 million smart meters are operating across Great Britain.
In the longer term, smart meters will be a cornerstone of a smarter, more flexible energy system, putting an end to estimated billing and helping people choose the best deal for them.
Protecting consumers now
While we continue to fix the market, we need to keep protecting customers in the short term. That is why we are bringing in a temporary cap on default tariffs and standard variable tariffs.
Over the summer it gained Royal Assent, ensuring it will be in place by December – providing much needed relief to households across Great Britain.
The cap will be set so that as well as protecting customers, it will drive efficiency and maintain incentives for competition within the energy market.
This cap is a necessary short-term intervention, not a long-term solution, and will only be in place until 2023 at the very latest.
Innovative suppliers are bringing new products and technologies to households across the UK, and I am confident we will soon have a truly smart, technology-led energy market with customers at its heart.
This is a guest article by Claire Perry, Conservative MP for Devizes and Minister of State at the Department for Business, Energy and Industrial Strategy. The views expressed here are not necessarily also shared by Which?.