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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
Guest

I agree that an urgent review of energy prices is essential. However in the meantime I would urge everyone to insist on having a smart meter installed, as we did nearly a year ago by Eon. Our monthly DD was about to increase to over £200 but since the smart metre arrived it is currently only £140! I didn’t think we were especially wasteful but think about it – what else do you buy that you don’t know the price you’ll have to pay for it until 3 or sometimes 6 months later? We now know quickly and easily what we spend on gas and electricity EVERY day – and a traffic light system warns when our consumption is high. And the best bit is that if everyone reduces consumption by even a small amount the energy companies will suddenly have spare capacity and may have to reduce prices to attract more custom. Like the banks we need to hit these greedy companies where it hurts most – customer numbers and sales turnover!

Guest

I’m not convinced that we need smart meters or traffic light systems to warn us when we are using too much energy. Looking at your costs, I think you have further opportunities to save energy.

Guest

Smart Meters do nothing at all to save energy and only very naive consumers will “learn” how to save using one compared to existing metering.

However. Smart Meters WILL cost all users and tax payers Billions of £ to implement, will restrict the ability to switch suppliers even further and have insidious and potentially very dangerous flaws built into them.

Smart Meters are not, and can never be, the solution to saving energy or reducing your bills.

As for £140 DD per month for dual fuel – that seems like a hell of a lot of gas and electricity compared to the National Average. Possibly very good for your household but hardly a ringing endorsement for Smart Meters I’m afraid.

Guest

@Dave D, Smart Meters will only cost customers money, as the energy companies are being made to fund it themselves ( thru what they charge us ), I don’t think there’s any extra Government money in it for them.

And if anything it should make switching easier, if not no change, as part of the reason it hasn’t happened yet is all the companies have to agree on the same model of meter. So part of the issue with price rises is possibly down to energy companies have spent money training their “sales staff” to install their own preferred meter, which is 99% probability not the one they’ll end up with.

Guest

Sadly as yet there is no legislative obligation for a single standard of SM to be used and there is a government commitment to fund the SM programme. See convos on SM’s for plenty of details.
Crucially , though, SM’s cannot possibly help us to reduce our bills (unless you count the fact that they will all be capable of disconnecting our gas and elec without warning which I suppose could count as some sort of enforced saving)

Guest

And of course once the SM roll out starts, I’m betting the number of distraction burglaries will rocket. “Hello Sir/Madam, We’re here to install you’re new meters, can you show my mate to the Gas meter while I pretend to work on the leccy one…”

Guest

Hello – re smart meters

They could help people control their energy use and it’s great that you have saved money. There are a few things to think about re smart meters.

Most smart meters that are fitted at the moment are not likely to be fully spec, in terms of having the final agreed technical standards. This will mean that you will probably have to have another one installed before 2019. While this may not be too much inconvience, the more early ‘smart’ meters rolled-out which aren’t compliant, may push up the overall cost – which will come out of our bills.

Also, the cost on the monitor is not likely to be the accurate cost. Mine says ‘for illustration only’. Be careful not to rely on this figure if you are budgeting or making sure you are on the best deal. Which? is pushing for this figure to be accurate.

Good to hear your experience and keen to hear from anyone else.

Guest

I’m not sure how much use a smart meter is, but I am sure that they are not good value for money at the huge price estimated for installation across the UK.

I’m not going to turn off my fridge (except when I go on holiday, of course) and I’m not going to turn off the freezer. I don’t know how much electricity my gas central heating uses, but cost of gas is a bigger concern. Apart from lamps, which are marked with their power consumption, almost everything else is plugged in. I have can test the consumption of individual plug-in appliances using a simple plug in meter that cost £9.99. I know that appliances consume power in standby mode (and can measure how much), and that they consume no power if unplugged.

I have no objection to people having a smart meter but I think they should pay for it.

Guest

Jenny,
I see “which” are sticking to their “party line” in support of the principle smart meters, although admittedly “which” does have concerns about the way the roll out may be conducted.

In a previous conversation I recall there was considerable opposition to these things. Opposition I feel “which” should take notice of and not only look at the way these things might be introduced and how much it might go over budget but if they are really a good idea at all.

I said it before, smart meters on their own won’t save anyone a penny. Any and all saving will come from our own actions. At £11 billion to roll out these things which we’ll all be paying for any “savings potential” (which I think would be very short lived if exist at all) would come at a very high price. If that £11 billion is available just think how much energy efficiency improvement could be made. Real savings.

I think “Which” should be looking hard at whether these things are really a good idea or not.

Guest

@ Jenny Driscoll and @ Chris, Gloucester.

Totally with Chris – Which? have acknowledged the mass opposition and also many of the issues such as the insecurity and the dangers (including as dramatic as explosions (gas) and death through medical equipment stopping (electric) inherent in the fact that SmartMeters are not actually meters at all, they are remote switching devices that happen to also register the energy used.

Any yet, despite all this, Which? chooses only to focus on the issue of the cost of the roll out.

That is very important, but it isn’t as important as people’s lives and safety, nor even as important as the fact that the mass public are being lied to (or at best, if you want to try to be generous) deceived – conned – into having their supplies placed completely in the control not just of the suppliers (who can’t be trusted) but hackers too.

It’s very similar to the Which? line on other issues which I keep banging on about such as supporting CFL lamps whilst (reluctantly at first) conceding that there are massive issues over reliability, light output, quality, safety and disposal, or insisting on telling us that modern appliances “cost less to run” or “use less energy” without saying THAN WHAT …. meaning that the mass public are idiotically buying new appliances which use more gas / electricity than theiur old, working appliances, because they don’t get told that the new ones only use less than other NEW appliances, but almost all use MORE than equivalent OLDER appliances.

Which? are not along but they need to get a grip and lead the way on exposing all these half-truths, untruths and incomplete stories.

Guest

Dave D,

I appriciate your support for my comment on smart meters. That being that they are a momumental waste of money and that I’m very disappointed “Which” does not seem interested in really looking at whether they will really benefit us all to the tune of the £11 billion, and probably much more, which we’ll all end up paying a proportion of.

However my opposition to smart meters is only based on the economics. I don’t subscribe to the microwave health risk or have notions that big brother will be watching, or think the supply companies will we switching us on and off grid at will. I just think smart meters are technology for technologies sake, will not provide energy usage savings on anything like a long term basis, are therefore unnecessary, and a waste of money on a biblical scale.

Also, I’m not opposed to low energy lighting including CLF bulbs, although I would conceed most of the commonly available supermarket versions are rubbish. Good ones which work as well as the old incandesent bulbs are now available, and something like an 80% electricity saving (for lighting) is worthwhile, even if that saving is a small proportion of overall electicity usage.

Finally though I do agree that “Which” should be looking into issues more deeply as a result of feedback from the likes of those of us who offer a comment. It’s seems, as with smart meters, that after the first “policy” or “party line” opinion “Which” formulates nothing anyone has to say triggers any real rethink. Or is “Which” prepared to offer solid reason for keeping to their party line. The case of smart meters again springing to mind, where all we keep hearing is “we think they could help people control their energy use”
Well, I’d like a little more than that to justify “Which” support and the expendature of £11 billion, and probably more, of what will be our money.

Guest

I don’t think they care. Do energy companies provide Tory party funding? I’d guess at a yes there. Poor people die…less on the benefits bill.

Guest

The energy market is mostly certainly broken. And its a shame you haven’t also included asking what plans are in place or will be in place in plenty of time, to avert the supposed energy shortfall around 2015.
Any review should also look into why switching is so problematical. I switched from one EDF tariff to another ( more expensive one, boo hiss ). That was 6 weeks ago and yet my account is still showing my old tariff which was supposed to be defunct as at the end of Sept 2012. To me, that’s just not good enough, how long does it take 1 person to type in a few numbers and click a couple of buttons. Sigh.

Guest

A smart meter may help some to monitor their usage – but it is still they who must make the savings, the meter won’t do it. I take a meter reading for gas and electricity each month and use a simple spreadsheet to monitor cost and to compare with predicted use (based on previous years). Either way you can spot unpleasant surprises.
I think a better understanding of how the energy market works would help these sorts of discussions. Just who owns the generating and gas facilities, and how do they charge the energy companies we deal with. Who owns the transmission grid and how is that cost charged out – and what do we pay for it. What do we pay for the Government’s green energy / CO2 emissions policy.
Who is going to be capable of harnessing the power of consumers to make changes? You would think that Which?Switch might get everyone migrating to the most competitive suppliers – if so that would have an effect on the others, wouldn’t it? But that clearly is not the case – inertia? Action needed, not words perhaps.

Guest

Switching just delays the inevitable. Whilst it is good to play the energy companies off each other, you are simply moving to a company that will eventually put their prices up.

Wholesale prices rise and fall yet our prices only rise.

My solution would be to nationalise (hear me out) but in a way that meant the private company would provide all the admin/meter readings etc and yet the government retain a controlling stake in the company to ensure that the majority of the profits are used to bring prices down and reinvest in things like burst pipes.

It’s how the Germans and Dutch manage their railways

Guest

The energy market is a complicated and (deliberately) confusing market. How many people will die as a result of the continuing rises?
I cynically believe that the price rises were delayed by a month so that the inflation percentage used for pensions rises next year etc would be lower and thus keep the government happy. I personally feel the government also knew about this.

Guest

Don’t be cynical, of course this was planned well in advance, look at british gas, special offer fix your prices until this time next year at no cost, so how are they able to do this if their costs are rising?

Guest

Nationalisation is unlikely to work – industries have not been well run in this way. And the Govt has many outsourced admin services now – mostly with disastrous results. They do not have the means nor the expertise to control outsourcing effectively.

Guest

Part nationalise then. Let the private company run it, take a reasonable profit, yet the government holds a controlling stake. Kind of having your cake and eating it. Get the private companies to run it and yet the government can decide how profits are distributed.

Guest

All that is needed is proper regulation of energy companies. If that can be achieved it would be much cheaper than part-nationalisation. It’s not just price and profits that need to be sorted out. Which? is pushing for simple tariffs that are easy to compare. Ofgem should have done this years ago.

Guest

Richard,
I would agree with almost everything you’ve said and I hope this open letter triggers some action, althgough I won’t be holding my breath.

My own feeling is that private ownership of UK energy supply is not working and this fundamental part of our infrastructure should return to public ownership, but not like in the bads old days. Nowadays nationalised energy supply if it were possible should have a strong independant overseeing body to ensure operational efficiency and fair pricing.

Of course re-nationalisation won’t be happening anytime soon even if there was a Govermental will to go that way (which there doesn’t seem to be) because there is no money to buy it back.
Thanks Maggie you did us up up like kippers big time, and sold the family silver just to bale us out of a previous recession.

At the next opportunity I’ll be voting for whichever candidate is pro re-nationalisation.

Guest

During Prime Minister’s questions earlier today David Cameron promised consumers that energy companies would be forced to offer the lowest tariff to their customers.

The Prime Minister said: ‘I can announce that we will be legislating so that energy companies have to give the lowest tariff to their customers.’

Which? executive director, Richard Lloyd, called the announcement a ‘big statement’ and a sign that the Prime Minister ‘acknowledges that competition in the energy retail market has failed’.

He added: ‘This is a big moment for consumers, but we must now see these words turned into action and see the detail from the government in the Energy Bill.’ http://www.which.co.uk/news/2012/10/energy-companies-forced-to-offer-cheapest-tariff-299730/

What do you think?

Guest

Sadly all that means is they’ll probably just drop all bar one of their most expensive tariffs, thus penalising anyone who can be bothered to keep on top of which tariffs are better for them. I’d rather the government made the energy companies publish the wholesale price.

Guest

“Which? executive director, Richard Lloyd, called the announcement a ‘big statement’ and a sign that the Prime Minister ‘acknowledges that competition in the energy retail market has failed’”
Well, I agree that competition in the energy retail market has failed, but I seriously doubt the PM thinks or acknowleges that. After all the whole mantra of the current Government is to back off and let private investment sort things out.

Just wait, what we’ll get is weasel words composed by some spin doctor and nothing will really change. For all our sakes, and especially the old and poor, we need to raise the profile higher and higher. Make it an election decider, then something will happen.

Guest

Oh do I win a prize, looks like npower are doing exactly what I thought the energy companies would do.

http://www.moneysavingexpert.com/news/utilities/2013/08/npower-cuts-down-its-tariffs-but-kills-off-top-pick

I hate it when I can say told you so 🙁

Guest

Chris, whilst many will be as cynical as you are (myself included) we should wait a reasonable time to see just what the outcome is. And there is more to responsibly electing a government than just this one issue, surely.

Guest

Malcolm R,
Yes of course there are other issues and I am prepared to give anyone a reasonable shot at sorting things out, but I do feel that any potential Government committed to actually doing something to sort out energy supply will also be prepared to address a good proportion of the other burning issues. Perhaps rediculous petrol and diesel duty, tax evasion by big corporations, economic growth, employment, the trains etc. etc.
When that party activist knocks on my door I’ll be asking plenty of searching questions about many issues including questions about the energy supply system. If I get the weasel words I’m expecting I’ll be making it clear what needs to be done if they want my vote.
Sadly I don’t really think anyone is going to step up to the plate and really there will be no one to vote for, but if we are ever to get change for the fairer and better we must keep trying, we must keep telling them.

Guest

Dave D raises the question of average usage (commenting on Jan’s DDR going from £140 to £200 per month). Ofgem publish (and employ) an annual usage for “a typical household with medium energy consumption” of Gas 16500 kWh and Electricity 3300 kWh. I calculate an annual bill for this of around £1150, or £96/mth. I don’t regard my household as excessively inefficient – double glazed, cavity insulation, 250mm loft insulation, thermostatic radiator valves, a new condensing boiler, CFLs. But I do like to be comfortably warm – 21C. Sadly my energy consumption well exceeds the “typical”. I would be interested to know how typical the Ofgem model is.

Guest

My house is a 1930’s semi, secondary double glazing in all rooms except, ironically, the one with the biggest bay window, no CWI (the construction method and aspect mean it is unsuitable), 33 year old gas boiler, using CFL’s in some lights, fluorescent tubes in the kitchen and incandescent bulbs in many lamps still, I have a 29 year old Washing machine (which has hot fill), a modern Miele dishwasher (with hot fill), approx 15 year old fridge and freezer, aquarium and 3 garden ponds with filtration units running all the time. My annual electricity consumption is the greater part of 1,000 units per year less than the 3,300 quoted by OfGEM and my annual gas bill (by the way, I cook by gas, bake dozens of cake each month for charity events and make about 500 christmas puddings each year for charity) comes in about around 12,000 kWh (it got up to almost 13,000 in the winter of 2010/2011). I don’t even consider myself to be an especially careful user, but I do refuse point blank to leave any appliance plugged in at the wall when it is not is in use and I try my very hardest never to buy an appliance that doesn’t have a “hard” on off switch.

By contrast, my neighbours had CWI fitted (and now have huge problems with damp), have uPVC double glazing throughout, have an energy savings trust recommended (and once-was Which? best buy) washer (cold fill), no dishwasher, an EST recommended silly American style fridge the size of a pantry, a SEDBUK A rated, Which? best buy gas boiler fitted 2 years ago and are self-confessed “gadget freaks” who I know leave most things on standby permanently, They like to crow about how energy conscious they are by having CFL’s and LED lights in every fitting.

Their electricity bill regular comes in at about £150 a month and their gas has been up to £700 in a single quarter (winter 2010 / 2011).

I don’t think the OfGEM figures are in the least bit representative of the great majority of households, but like any other AVERAGE, don’t forget that it only takes a very small number of super-low and super-high values to skew the average considerably.

Knowing how wantonly wasteful many people are of energy – like my neighbours with their dozens of gadgets on standby – and how meaningless the EST and Which? recommendations are for products that actually save energy, I guess that the OfGEM averages are skewed very high by households with every modern appliance and gadget that money can buy all consuming energy like there’s no tomorrow.

Just my thoughts ……….

Guest
Alban Thurston says:
18 October 2012

The fightback by UK’s consumers to break the power of the Big Six’s profit-export drive must be through much needed measures to simplify supply of local green energy. Priority grid access for 600-plus local energy co-operatives, plus community or municipal ownership of regional grids -, has cut wholesale electricity prices in Germany by a fifth since 2008, introducing genuine competition to Europe’s biggest market. Now German consumers buy 11 % of their electricity from truly independent suppliers; in the UK, it’s less than 1%. Transparent, time-limited subsidy, in the form of Feed-in-Tariffs, is Germany’s route to green self-sufficiency; meanwhile, our corporates prefer to sell us climate-busting Russian gas or Polish coal; an agency of the French state begs Whitehall for secret feather-bedding of ever-more costly nuclear. German politicians of all parties see their energy policy working well, in the interests of consumers, and the environment. In contrast, our politicians bend to lick the boots of overseas corporates’, bend their message to whatever audience they face, and elevate the interests of transnational companies above those of UK voters.

Guest
Bryan says:
19 October 2012

Energy companies keep making excuses for thier rising prices, but never give any reason for thier increased yearly profits. They should be made to return excess profit back to the consumer.