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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
Ian Smart says:
23 September 2016

What annoys me about energy prices is two things. One – when you come to end of your contract they don’t switch you to their cheapest contact automatically. They know how much energy you used the previous year so why can’t they work out what is best for you rather than switch you to their most expensive standard contract. Two – why do they offer such good deals to people who join energy collectives and not offer the same deals to their loyal customers? The industry should never have been privatised. Someone somewhere is making big money which could have gone into government coffers to give us the fully funded NHS we need.

Ian Smart says:
23 September 2016

By the way, just changed my supplier to British Gas and saved a massive £300 on what Eon wanted a year. I did this thru MSE’s Cheap Energy Club moneysavingexpert.com. It’s a collective as mentioned in my previous post. You also get Nectar Points.

Good luck to you, I am so pleased I got away from British gas as I saved myself pounds. I am with EDF and pleased that I am. Watch British gas their bills very carefully, as they have nasty stings in their tail.

Well, I’ve just switched and feel the need to share my experiences with Which? Not sure if this is the correct thread, but it’ll have to do.

Whilst I’ve saved over £400 on next year’s Gas & Electricity by switching from Eon to Npower, the switching process has been a total pain in the butt.

It seems that it is impossible for both the Electricity and Gas to change over on the same day, indeed there has been almost a month between the two. But nobody tells you that at the time… just ‘welcome to Npower’, and then, later ‘we need your meter readings’. Which I gave them, only to get another one later because the Gas hadn’t been ready to switch when I’d given them the previous readings so they just disregarded the Gas reading. And then, when I did give them a new Gas reading (and new Electricity reading) almost a month later (when they asked for the Gas one – luckily it had hardly changed as August and early September were so warm) they ‘couldn’t process my readings’ as I’d been on holiday when they asked and didn’t get home to read the meters until after the deadline they’d arbitrarily set.

And then, to add insult to injury, they simply didn’t pass on any of the meter readings I’d given them (several times online and once by a phone call) to Eon anyway so I’ve just ended up with a final estimated bill for both fuels from Eon. What on earth was the point in me wasting my time in giving meter readings in the first place?

From the original quote and switching request (to Npower direct – although I discovered the deal through Which? There was a reason I didn’t use the service to make the change though) on 27th July, my final Electricity Bill from Eon was dated 30th August and the finaly Gas Bill from Eon was dated 24th September… nearly two whole calendar months!

It’s almost as if they deliberately make it as difficult as possible to try and put people off of doing it again next year.

I’d urge Which? (if anyone is monitoring this thread) to push the regulator to ensure that the switching process is streamlined from where it is now. There can surely be no good reason why it takes a month longer to change the Gas over than the Electricity (which took over a month anyway).

Anyway, thanks for giving me the opportunity to rant. And I hope that my experience can help to secure some improvements to the system in future. 🙂

PS. Can’t help wondering if it’s always this complicated/messy or if Npower are just more useless than all the others (as their Which? customer score would suggest).

Interesting report, Peter. Do you think switching will be any simpler with a smart meter? . . . No, neither do I; what’s needed is a smart administration process.

Ofgem are pushing for switching to be completed in a week (plus, presumably, the statutory cooling off period). However Peter you have at last become unstuck to make a £400 saving! Bet you wish you’d done it years ago.

Smart meters? Who will take any notice of them? On a cost benefit basis they are a waste of time. In my view.

It is possible that Peter might have been able to change to a more economical tariff within E.On and not had all that hassle. I have stayed with E.On because overall, by taking advantage of their new tariff opportunities from time to time, there has not been much advantage from switching. In any case, there aren’t many companies left now who I haven’t condemned and vowed never to go to again!

All I can see a smart meter doing is enabling the utility companies to increase profits even further by cutting staff costs as they won’t need meter readers any more. I can’t see any benefit to the consumer when compared to the cost. Unless you find sending them an actual meter reading online once every three months too much hassle.

I have switched before Malcolm. I was with EoN as their previous fixed deals were amongst the best around at the time (and I actually have found EoN’s customer service pretty good over the past 5 years). But they didn’t bother even trying to compete this time and couldn’t get near the nPower deal.

It’s good to know that Ofgem are trying to make things more streamlined.

I also like EoN’s customer service John (despite their poor showing in the Which? reports). But they didn’t have any new tariffs that were even close to what nPower were offering. I probably wouldn’t have bothered switching away from EoN to save, say, £70-£100 a year, but £400 is too much to ignore.

I have just used Which?Switch to check whether I can get a better tariff, prompted by John Ward’s contribution above. My circumstances are such that E.ON’s Saver Plus Fixed 1 year v2 comes out significantly the cheapest. It has a high standing charge but a low unit charge and will prove advantageous even if I halve my gas consumption.

So I rang up E.ON. I’d rather deal direct than pay a possible commission, as that just adds to others’ costs. I was surprised to be told that they could not offer me that tariff; it was still available but only through the switching site.

So I had to make the switch online through Which?Switch. They presumably make a commission from the switch? It looks like it is between £15 and £45 that “goes toward their campaigning” (I already pay for that in my subscription!). I an concerned that some tariffs may only be available in this way; surely all tariffs should be available to all and offered direct from the supplier as well as through switching sites? I am particularly concerned that E.ON’s cheapest tariff is made available to Which?, but not direct to customers.

I don’t think existing customers get notified of it either, Malcolm. Even if might not be suitable for our situation I would have liked to be told about it. This is clearly a marketing technique to increase market share. It will be interesting to see what is offered when the year is up.

The description on the switching site says it is for new customers only, John. I will no doubt be switching again in 12 months, but meanwhile I’ll take advantage!

I agree with your comment that “all tariffs should be available to all and offered direct from the supplier as well as through switching sites” but special introductory offers have become common practice nowadays in most sectors. It’s this creeping sense of restriction by commerce that I don’t like. It would be strange if Sainsbury’s said I couldn’t have the next box of Corn Flakes at an offer price because I had bought some two weeks previously. But then you don’t have to sign a contract to shop at Sainsbury’s.

I think I might leave E.On at the end of my current contract and, when they ask why, I’ll say > because they discriminate against loyal customers and because they are prepared to pay up to £45 in order to gain each new customer as well as charging a lower price for the fuel. I am looking favourably at EDF at the moment.

Earlier this year I moved home and decided to stay with the energy supplier – e.on – used by the previous owner to make transfer of the account easier.

I switched from e.on at my previous home because they repeatedly increased my direct debit even though I provided regular meter readings and had a healthy credit balance.

I have now been told that e.on is intending to double my direct debit even though I have a balance of around £130. I appreciate that my payments will need to go up over the winter months but I’m quite capable of monitoring my use and adjusting my payments accordingly. I think I might be moving from e.on to Ovo, as I did with my old home.

The energy companies need to be managed properly.

Which? mag Oct p7 says “OVO now too pricey to be a WRP”. Be interesting to see what your estimate is.

Many people seem incapable, if you believe what some surveys say, of managing their own financial affairs so this is presumably why some suppliers increase payments to avoid very unpleasant surprises in the spring from a deficit in your account. If an actual annual energy consumption has been recorded then a cost estimate is simple and a monthly direct debit to pay this is easy to derive – by the energy supplier and most consumers. Use Which?Switch to get an annual cost estimate and divide by 12; that should roughly be your monthly payment and if it is not, challenge your supplier.

Not aimed at you, wavechange, as you will be among the many who are more than capable 🙂

I will wait until I have some idea of what my use is likely to be during the winter months. So far most of my energy use has been for water heating and cooking and only in the past few days am I putting the heating on.

This industry has another problem when it comes to switching suppliers. I am currently with Eon. Contract coming to an end, wanted to stay with them. The new price was at least 40% higher for combined fuel. The woman I spoke with at Eon on 29 September told me that switching takes about 2 and a half weeks and an exact date can not be guaranteed. Ridiculous. Surely if more than 2 and a half weeks notice is given an exact date can be guaranteed. This situation, if accurately portrayed to me, must change.

Two and a half weeks to switch suppliers sounds about right to me from experience. It used to take far longer than that. Don’t forget that two fuels and two different companies are involved and some of them are not exactly super speedy in the admin events. Try it from the other end – ask your intended new supplier to organise the switch [that is the usual way of doing it anyway].

I am in the process of switching to E.ON. It is the new supplier who does the work in my experience. There is a 14 day cooling off period, so that will be the minimum time; they have quoted an estimated 2 1/2 weeks.

The previous coalition government aimed to get switching down to one day; presumably that really means 15 days to allow for cooling off.

Lowest common denominator strikes again…. Those of us who know what we’re doing simply don’t need a cooling off period. I appreciate that you need to protect the ignorant and gullible people out there, but are they really going to be in a position to take advantage of the cooling off period anyway if they ‘fell for’ whatever technique was used on them in the first place? I’m not sure how much it helps most consumers.

And for those of us who made a conscious decision to switch because we’ve spent a long time researching the best deal, it’s just and unnecessary delay and obfuscation.

Any distance selling has a 14 day cooling-off period. Hopefully during that period the new supplier will be able to get their admin systems up and running, customer bank details processed, meter readings exchanged, literature posted out, and any customer queries answered. In practice it probably makes little difference to the overall timescale.

One advantage of the cooling off period is you should see your contract details in full, in print – tariff, exit charges, Ts+Cs – so anything you might have missed, or wish you had asked, when applying on line or over the phone can be seen and checked against what you thought you were signing up to. No need to rush, really.

British Gas are by far the worst of all, along with their rotten lousey central heating service and their rotten lousey so called servicing also. The lies you get from their so called customer service is also a sham.

I leave in the east midlands and in the middle of an estate 3 mile outside of the town.
To help manage our bill I wanted to get smart meters.
I have just tried to have Gas and Electric smart meters fitted but failed the installation test, we do not get a decent mobile phone signal from any provider in the area which is need to snd the data back . So how are the users in rural areas going to manage
If the companies are to meet the 2020 deadline we need an improvement in the mobile phone structure

Sadly, I can atest to the matters referred to abov, for not only have I too experienced the issues highlighted, in the end, BG said I owed them £1000 !
I’m afraid, this is only the tip of the iceburg, the dispute puffed along for over 2 years, now I am in the proess of switching to another supplier, if these giants would only use their ‘more than adequate intelligences’ to actually improve their customers experience, would that not lead to very cost effective improvemnet in BG’s revenues?

Philip, How do you think smart meters will help you?

EDF keeps telling me I am on the lowest tariff but offers lower prices to NEW customers. Loyalty should be rewarded. Outlaw different tariffs for NEW and EXISTING customers and stop energy providers lying to its customers.

I am not sure whether my three years with E.On is loyalty or just complacency, or lethargy even [none of those really because I do compare the market via Which? Switch from time to time]. E.On seem quite fair but I wouldn’t defend them against all criticism or stick with them if a much better tariff came up – that would be loyalty. In any case, I don’t consider ‘loyalty’ should be rewarded as I am free to leave at any time. A good introductory offer from a different supplier would be welcome, actually, so I am in favour of such temporary tariffs being allowed.

John McK says:
13 October 2016

If ALL the loyal clients left each of the big 6 they would have to rely on New Customers.
I think then they would have to RETHINK their strategy for Loyalty.

Clients don’t have to leave the “Big 6” to get better deals. There seem to be a number of fixed term fixed price deals on offer from some of them that would give decent savings to those stuck on poorer tariffs.

“I think then they would have to RETHINK their strategy for Loyalty.”

Wouldn’t it be great if home & car insurers could do that?

Commercial organisations exist, primarily, to make a profit for their owners and shareholders. Without being profitable the business would cease to exist. Loyalty really plays no part in this – it implies a selfless one-way benefit, such as you would show to family for example. But business generally looks for a benefit in return – “look after” a client and they will continue to give you profitable business. I don’t call that loyalty, just maintaining a good relationship.

Attracting new customers by giving them an initial discount is about hoping to keep them and expand their customer base; good for their business is the idea. Like a loss leader in a shop.

Some of us feel that there is a better way to run business.

Nothing to stop them setting up their own businesses and doing it their way.

There is The Cooperative Energy for those who seek a dividend for loyalty. It doesn’t compete on price, of course, although it does get close at times.

The Cooperative Energy is anything other than cooperative in dealing with complaints. We have been billed several times for both gas and electric for past years. If we had not kept the receipts, we would have had to pay these amounts. The matter has had to be referred to the OS Energy ombudsman for scrutiny. Recently they have announced an increase in tariffs. So much for loyalty

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When we were with The Cooperative Energy in our previous house we could not fault the customer service. However, on moving to our present property the offer from E.On, the supplier connected by the developers, was too good to miss and left the Cooperative standing on a like-for-like basis taking into account the non-unit price terms.

I can still remember my mother’s Co-op Divi number from the days when she shopped at the London Cooperative Society [461558] and I have always wanted the Co-op to be the best place to go for quality and value but sadly they lost their way several times down the years. They could well be the firm that undertakes my final contract though.

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EDF’s bill assures me that I am on their cheapest tariff. I am on Economy10 and EDF do not give me any other options for this tariff, such as fixing prices for a set period. I have asked but they are not available for this tariff.

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I’m an OAP, living on a tiny pension by myself following the recent death of my husband. My monthly direct debit from my current supplier of gas & electricity amounts to slightly more than two weeks of pension, leaving me very little for other household expenses. Why can’t energy costs be lower and how are the elderly supposed to cope with such charges and still make payments for council tax, water and sewage as well as being able to feed ourselves healthily and meet transport costs?

I have much sympathy with you Lesley. It is not sufficiently recognised that when one half of a household dies it leaves a massive financial gulf because the household expenses carry on at the same level. It is not always easy to reduce them, even if moving to a smaller property. If you are the only adult in your home you will be eligible for a 25% discount on your council tax. The impact of energy bills on elderly people is severe because you might need a higher level of warmth for a longer period each day than other households. You are also disproportionately affected by the government’s levies on energy bills.

Bob Bent says:
21 October 2016

Energy company profits are excessive and need to be regulated or controlled.

If you look on the Ofgem website they give the profits the major energy companies make. They, on the basis of these figures, are not excessive. However you may have different figures; would you perhaps tell us what they are?

Norma Welsh says:
21 October 2016

I am with British Gas and I get free electricity from 9.00am – 5.00pm every Saturday until 2018.

Norma, I would use Which?Switch to check what other suppliers could offer you. The last time I looked at BGs offer, even with “free” electricity they were significantly more expensive than many other providers. It could save you a lot of money. worth looking.

So that we can compare prices fairly, companies should only be allowed to change prices on a fixed date each year–say, January 1st. At the moment, as soon as I change, a company can change its price. It’s hard to compare.

There is no need for all these power companies and tariffs one national company makes sense with an independent watch dog.

Id love to back to a time when there was one electricity provider and one gas with the exception that we probably need more so as we can have ecologically aware company’s such as Ecotricity and good energy .
If the government had there way we scrap wind/solar etc and indulge the dirty energy of fracking until the human race was wiped out.

scot, it is the government who have encouraged wind farms, solar power.

There never was such a time, Scot. There were dozens of gas and electricity boards each with their own tariffs. Most towns had a noxious gas and coke works and our power plants were indescribably filthy both before and after combustion. Smog, soot, sulphur, and ammonia were just some of the nasty by-products that our environment was expected to absorb.

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Why can another company buy gas and electricity at such a rate that the can save me over 25% off my bill and still maintain a profit.
British Gas is about to increase both my discounted tariffs by over 30%, yet another company can supply me with the same product at an actual cheaper rate than the one I am on now.
British Gas are also pushing for their customers to pay this incredible hike in price or transfer to their partner company “Sainsbury’s Energy”

Why can’t British Gas just have a price per unit for each and every one, whether the customer be Sainsbury’s Energy or Mr Joe Public down the road.

Why do we have to pay VAT on an essential product.
Value Added Tax was originally for luxury / none essential goods.
I remember the PM John Major on TV stating “I can categorically say there will no VAT on Electricity or Gas”. but as usual with any politician when their lips move they tell lies.