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Dear Prime Minister, the energy market is broken

Pound coins on energy prices

Energy companies have hiked prices, but are their reasons really justified? In this letter to Prime Minister David Cameron, we call on him to commission an urgent, independent review into the energy market.

Dear Prime Minister,

Today marks the anniversary of the Energy Summit you held that promised action to help people to keep their energy bills down.

One year on, and with winter fast approaching, more than 20 million households are facing inflation-busting price rises as four of the UK’s largest energy companies put their prices up yet again.

With the average energy bill already rising 13% since last year, it is no wonder consumers tell us that energy prices are one of their top financial concerns.

After the Energy Summit, you said “we are making energy companies be competitive” but there is little evidence of this. 75% of consumers are on the most expensive tariffs and the level of switching continues to decline.

It’s time to face facts: the energy market is broken.

People are questioning whether they are paying a fair price for their gas and electricity. The energy companies blame wholesale price increases but even the regulator has found that prices don’t fall when the wholesale price drops. The sector is dominated by a handful of big and powerful players who are seemingly unaffected by the normal competitive pressure of price and customer service.

They also blame the cost of implementing your government’s environmental and social policies for the price rises. Yet, as your own Energy Department has said, there is no hard evidence to back this claim up.

Claim and counter claim are played out in the media but consumers deserve the truth. Ofgem’s proposals to change the retail energy market, expected shortly, are necessary but not enough.

Urgent, independent review into the energy market

So today we are calling on you to launch an urgent, expert, independent review into the rising cost of domestic energy bills and whether competition among energy suppliers can be made to work more effectively in the consumer interest. We want an independent review to look at whether the reasons given for the recent price increases are justified.

We also believe a review must identify what reporting measures should be required of energy companies, relating to both the wholesale and retail markets and the costs of social and environmental policies, to increase transparency and give consumers confidence that everything possible is being done to keep energy prices in check.

The review must also consider whether the regulator should now be required to better protect the majority of consumers on expensive ‘standard’ tariffs by introducing a fair cap on ‘standard’ prices.

Until we see greater transparency and prices presented clearly, consumers will continue to distrust the energy market and remain unable to drive genuine competition through moving to the cheapest tariffs.

The time for action is now. Warm words alone are not enough to keep consumers from the cold this winter.

Yours sincerely,

Richard Lloyd, Which? Executive Director

Comments
Member

Hmm, not sure how biased this is, but I wonder if the Government are even looking at things like this here.

http://www.telegraph.co.uk/comment/9559656/Germanys-wind-power-chaos-should-be-a-warning-to-the-UK.html

Maybe that could have been added to the the letter to the PM.

And then there’s always http://www.telegraph.co.uk/comment/9622068/It-is-wind-power-that-will-send-our-bills-sky-high.html

I can’t work out if the Telegraph is anti government or anti green policies. They’re certainly anti saying things concisely.

Member

The big problem for the electricity supply industry has always been that an enormous amount of capital plant has to be made available for producing electricity when it is needed, and of course for the peak periods.

This means that a large amount of plant is lying around doing nothing or on tick-over for much of the day and Smart Meters do provide an opportunity for the supplier to modulate useage during those times when the capital plant is least used. As you will know the storage radiators achieve this to some extent, and many washing machines now come with internal time switches to start at the time one selects, and as such when the price could be cheapest of course.

There can be little doubt that the consumer would get use to using their high powered appliances should they be aware for example that it is much cheaper to start the dishwasher after 21:12 but costly to use in the early evening. There is a plethora of choices which could be used to enhance the better use of capital investment used in the electricity industry by inspiring the consumer with cheaper tariffs.

However, despite us being blessed with over 50 years of Which Magazine and the Consumer Association this nation is more “Rip Of Britain” than it was in earlier years and any use of modulating tarriffs based on time/day of the week etc would just be used by the Big Six suppliers to bamboozle the customer into a zombie like state such that the consumer never knew what they were paying. Rather like what we have today but on a large scale.

The answer is with our politicians of course and sadly not with the three main political parties which like our escalating energy prices all represent more of the same old thing.

Member

Can you explain how these smart meters are going to ‘modulate’ usage?

They will be able to cut someone off and switch on again but they cannot vary the power being used. Indeed I would regard it highly dangerous if the meter could reduce the voltage or current (therefore) power used by a device since that may mean it operating outside tolerances and thus may cause damage to said device.

The only way ‘modulation’ could occur is if all devices in a home were under direct external control and for that to occur all devices would need to be replaced at vast waste, cost and ecological harm. It would also take several 10’s of years!

Member

The term modulate may not have been the best choice of word since those with electrical knowledge often think of something like FM, AM etc. It is used here in the sense that a cheaper tarriff comes into operation ie. 7.8 pence per kW – hr rather tha 15.2 pence per kW -hr not including the much hidden equivalent of a VAT charge.

Member

In which case if the meters are smart they can dynamically switch between tariffs and suppliers always ensuring you are paying the minimum – some hope eh!

Lets face it the benefit is all on the supplier and none (possibly -ve) to the consumer.

I have reviewed the specs of the meters and more importantly the HID and find that after a standard warranty period the cost of replacement of the HID is down to the consumer.

Anyway I still don’t see the meter ‘modulating’ or switching anything, how is ‘the smart meter’ going to do the switching as suggested by you originally, you will have to take the action yourself and only if you have a HID that supplies you with tariff information

What, use the Internet I hear you say, a large number of people are NOT online and don’t want to be, why should they be disadvantaged ( remember those not online are those who the meter may help the most!) the Internet is not free.

Member

A really smart meter would come out of the cupboard in the middle of the night and do the ironing for us.

Member

A really smart meter would make sure we didn’t have to pay for the energy in the first place;-)

Member

1. DECC estimate the cost of smart meters as £10 billion, with benefits of, I interpret, around 15-16 billion of which £6.4 billion wil “benefit consumers from reduced energy use and taking advantage of off- peak tariffs” (sorry if this has been said earlier). I don’t follow why it takes a smart meter for people to reduce their energy use – if anyone is interested in reducing energy they can monitor their use already and do what – apart from turning off appliances on standby? If you want to encourage off-peak use, other than the economy 7 time band the suppliers could simply publish the times of day when electricity would be best to use so you could maybe plan your dishwasher, washing machine, accordingly, but I doubt you will affect cooking, TV, kettle boiling will you. I may have missed the point of smart meters.
2. One real advantage of them could be that if they incorporate remote switching, if load has to be shed (a power cut), it could be done selectively, so that those dependent upon electricity could be kept on line – for example those using medical equipment at home, or vulnerable people totally dependent upon electric heating.
3. The argument that if you not online and don’t want to be you should not be disadvantaged keeps cropping up. If there are real advantages to the supplier by having online customers – paperless billing, for example – and if consumers can use it to find the best deal, then they should take advantage of it and benefit. The danger making effort unrewarded is what has damaged us in the past. “Going online” provides the means to save so much money – my dishwasher was £100 less than “retail” by searching online – why try to prevent this kind of initiative just because others “don’t want to”. Give it a try. But there are other equivalent methods to online – Which? publishes best buys and best sources with phone numbers.