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Update: reforming the energy market

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Ofgem has announced plans for reform in the energy market. What can energy companies do to make you take an interest in your tariff?

This morning Ofgem responded to the Competition and Markets Authority’s (CMA) investigation into the energy sector.

As many of you will know we’ve long campaigned for a fairer energy market, and the regulator is looking to implement the CMA’s recommendations as quickly as possible.


Well done Ofgem

It’s not often we get to praise regulators, but we will where we believe they have acted in the consumer interest.

It’s good to see Ofgem swiftly take forward the remedies set out in the CMA’s final report. The CMA’s investigation took two years to complete and it’s right that consumers start to feel the benefits of reforms as soon as possible.

The remedies that the CMA set out will not be easy to implement.

Making the remedies work for consumers

One of the biggest challenges Ofgem faces is how it will get consumers to engage in the energy market. We’re pleased to see that it will be testing a number of approaches. One of these is a consumer database listing anyone who has not switched energy supplier in three years. These people could then be contacted by other suppliers with their deals and tariffs.

We have concerns that this database could lead to an increase in nuisance marketing from energy companies, so we will working with Ofgem to make sure this doesn’t happen.

Ofgem has also announced a price cap on bills for customers on prepayment meters. The price cap will be introduced in April 2017 for more than four million customers helping them save £75 a year on their energy bill. It’s hoped that the price cap will protect some of the most vulnerable gas and electricity customers who are least likely to switch.

What will a fairer energy market look like?

In terms of the future regulatory model, Ofgem continues its move towards a principles-based approach to regulation. What this means is that the regulator will encourage companies to focus on performing for their customers, in terms of delivering services that customer want, rather than jumping through regulatory hoops.

One way we suggest they could do this would be to look at developing customer challenge groups (CCGs). CCGs are independent and challenge each company on how it’s engaging and listening to its customers, including reflecting their priorities.

Make a switch

Nine in 10 households are still customers of one of the ‘big six’ gas and electricity companies (British Gas, EDF, Eon, Npower, Scottish Power and SSE). And one in five customers in England have been with their supplier for more than 10 years. So if you think you’re paying too much for your energy or are fed up with poor customer service, don’t put up with it, make a switch.

Update: 7 February 2017

The energy regulator, Ofgem, has announced a temporary price cap for energy customers on prepayment meters.

The regulator’s announcement follows last summer’s conclusion of the Competition and Markets Authority’s energy market investigation, which found that some of the most vulnerable energy customers are those on prepayment meters.

Energy customers who are on prepayment meters often have fewer tariffs to choose from than those who pay by direct debit, cash or cheque, and these tariffs are usually more expensive too.

The cap levels vary for electricity and gas depending on where you live and the type of meter you have. But, the price cap is expected to be in place until 2020 and will be reviewed every six months.

Ofgem believes that this price cap will help around four million households to save an average of £80 per year. This price cap will come into force on 1 April.

Our Managing Director of Home and Legal Services, Alex Neill, said:

‘While prepayment meter customers are going to get their prices capped this year, millions of other vulnerable energy customers are likely to face inflation busting price hikes.

‘This is why energy companies need to do much more to engage their customers to switch to a better deal this winter. If suppliers fail to do this, the Government and regulator need to step in on behalf of energy customers.’

Will this price cap help you or your friends and family? Do you think more needs to be done in the energy market?

Comments
Guest
Chris Charge says:
22 October 2016

Why do Energy companies not charge per unit as measured on the meter rather than use ridiculous formulae to conceal easy comparison between suppliers.
I would make them show comparison of their unit rates on a like for like basis.
It couldn’t be to confuse customers ….could it ?

Guest

The energy you use – units of electricity, cubic metres of gas – form only around 45% of the cost shown on your bill. The rest are transmission and connection maintenance, government levies, admin and company costs. Not a formula but an assembly of different costs.

Guest
Philip Jordan says:
22 October 2016

Great if you can get the HMG to increase fair sustainable Energy price competition, but even more important to get them to significantly & urgently address the glaring inequity caused by their refusal to build public housing & ensure that this & all new/existing buildings are to Enerphit/Passivhaus standards
e.g. https://www.theguardian.com/money/2016/oct/22/three-bed-house-500-energy-bills-how-you-can-slash-costs & as part of this similarly solve the lack of well paid jobs for those who are not graduates,
as well as graduates (currently also suffering crippling levels of government caused debt). Remember it’s all very well getting CAB Citizens Advice ref Energy Saving but this apparently includes yet more debt?! Meanwhile too, it seems Local Government’s HECA action is similarly hamstrung by HMG austerity?!

Guest
Pete says:
22 October 2016

All energy suppliers should be owned by the government not by overseas company and there should be
single price for single or duel fuel!

Guest

Would you really want to put so much power over your domestic expenditure in the hands of the government, Pete? Could you trust it not manipulate the prices for political purposes? At least if I don’t like the companies that supply my energy products I can switch and mix-&-match to my heart’s content. Your idea smacks of communism to me.

Guest

Most government departments are already sub contracting out to private companies who are benefiting from taxpayers money. Civil servants are turning up at their offices every day in the role as custodians, paying our money to others to carry out the work for them ……………..and they are being paid for the privilege!

Guest
Richard G says:
22 October 2016

To keep the price down, we need many private energy companies to compete, but they should be restricted to offering a single tariff to all. No more special discounts to big customers, paid for by higher charges to the little guys. No plethora of confusing deals. Let us have an open and honest competition for our custom.

Guest
Gordon Murray says:
22 October 2016

Fracking is an unacceptable practice. All fossil fuels need to be phased out rapidly. Nuclear (unless we move to Thorium based reactors and develop effective means of neutralising nuclear waste) has to be phased out rapidly, it’s far too dangerous. Energy should be derived from renewables. Scrap Trident and free up the 220 billion from that piece of madness to speed up our transition do renewables. 100% renewable infrastructure to be implemented by 2020. Decentralised grids. Oh ye cheaper energy prices, followed by free energy in the next decade.