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It’s make or break time for energy suppliers

Energy prices up

The results are in. The outcome of the long-awaited energy market assessment was released today and it’s good news for the 45,000 of you who backed our Fix the Big Six campaign. But we haven’t won yet…

Ofgem has decided that the energy market should be referred to a full scale competition inquiry.

The assessment found that retail profits increased sharply between 2009 and 2012 with little evidence of increasing efficiency from the suppliers.

It also expressed concern that the structure of the market means that it doesn’t work for the good of its customers.

We hope that this provides an opportunity to quickly address and resolve the underlying problems of a fundamentally broken energy market. We know that energy prices are consistently at the top of consumer concerns, and we know that levels of trust in the energy industry are at disastrously low levels – just one in five of you think your energy provider will act in your best interests.

A competitive energy market?

The inquiry has to take a long hard look at a structure that allows big energy companies to keep a stranglehold on vast swathes of the market.

The practice of buying and selling energy to themselves should be brought to an end and this can only be done by separating the supply and generation parts of their businesses, just as SSE committed to doing yesterday. This would add a level of transparency to the market and would provide a much greater degree of confidence that we’re being charged a fair price for the energy we use. Plus, SSE’s action proves that suppliers don’t have to wait to be forced to act – they can do so on their own right now.

Rebuilding trust in the energy market

The process of rebuilding trust in a market that has taken all of us for granted will take time, but this is a crucial first step. It’s good news that the regulators have listened to the tens of thousands of people who have supported our Fix the Big Six campaign. We now need the investigation to work quickly to expose what’s really happening in the energy market and confirm where competition is lacking.

We’ll be working hard to ensure your voice is being heard throughout the investigation, and we’ll continue to argue for radical reforms to ensure that the market works competitively for everyone – especially for the millions struggling with spiralling bills.

What do you think about today’s announcement? Is this the start of a journey towards an energy market that works in your best interest?

Comments
Profile photo of RichardBrinsden.
Member

The big six is a price rigging cartel,always has been and always will be.One of them could halve their prices and take over all supplies,but it will never happen because it is a closed shop.

Member
Ian says:
31 March 2014

Scrap standing charges altogether.
If I owned a Energy Company I would have only ONE SIMPLE TARRIFF for ELEC/GAS for everyone.
OAP’s during the Winter period no matter how long the cold spell – FREE.
How many of the big six would follow suit ?
Especially if I took away, a lot of customers, from them. Only then would they bring there prices down and offer similar schemes.
That’s COMPETITION not ONE puts up the prices and the others follow suit.
NO CUSTOMERS NO BUSINESS
They make MORE money from distribution, than from the customer. They don’t tell you that.
Are well I can but DREAM.
RE-NATIONALISE

Member
Paul Hunt says:
31 March 2014

Politically, the proposed decision by Ofgem, supported by the CMA and the OFT, to refer the “supply and acquisition of energy in Great Britain” to the CMA is a ‘big deal’. It is intended to shoot the fox that the Labour leader set running with his commitment at his party’s conference last September, if elected, to impose a price freeze. It was not before tme for Labour to begin thinking about repairing the damage it had done over 13 years.

Gordon Brown’s windfall tax set in train a decade of asset sweating and flipping, equity extraction, high leverage, financial engineering, tax avoidance and the hollowing out of balance sheets that actually kept final electricity and gas prices low in real terms. The excessive national subsidisation of intermittent renewables that accompanied the onset of the Great Recession, combined with the shale gas boom in the US releasing supplies, and lowering the price, of internationally traded coal, with a large share of oil-indexed external gas supplies, and with the phase-out of Germany’s nuclear fleet, all hammered the balance sheets, share prices and market cap of the major European energy companies.

The reality is that final energy prices in Britain have only begun to catch up with excessively high prices in much of the rest of the EU as the big energy companies seek to repair their balance sheets. Four of the UK’s Big 6 are subsidiaries of four of the EU’s Big 7 and are doing their best to help their parents at the expense of consumers in Britain. SSE and Centrica are going along happily for the ride.

This proposed UK inquiry will achieve little, though a comprehensive inquiry by DG COMP might achieve something of substance. The solutions lie in a reduction in the excessive subidisation of intermittent renewables, the acceleration of approvals of US LNG export projects, the repair of the EU ETS, the development of a competitive EU market in gas transmission pipeline capacity, complete ownership separation of the currently vertically integrated wholesale and retail businesses, the re-establishment of currently captured energy regulators to ensure they strike a balance between the interests of investors and those of final consumers, the roll-out of smart meters to all final consumers, limited government guarantees during the construction and early operations phases of energy infrastructure projects and the restriction of subsequent ownership to genuine long-term, ‘rate’ investors.

The proposed inquiry is incapable not only of addressing the real underlying detriments, but of identifying and enforcing these remedies.

Member
John says:
31 March 2014

All the above letters cover most of the subjects that the energy suppliers should put right I will add a question, How many members of the government are share holders in the Energy companies and would not support any change, as it will affect the bonus paid to them.

Member
Sally Montgomery says:
27 April 2014

I would say too many, we have major problems not only with the cost of energy itself but also the standing charges and as for energy saving that’s a laugh with the poorest paying for the rich to get richer. When pensioners shiver under blankets in uninsulated homes while paying for private landlords and millionaires to reap the benefits something is very wrong

Member
Jo says:
1 April 2014

I must be missing something but I CANNOT understand why the Labour Party are not promising to re-nationalise? They would walk the next election and Milliband would go down in history as a brave leader, doing the right thing for the people. I don`t believe it`s because they are associated with energy companies or have shares, as a so-called Socialist party they`d have too much to lose if found out whereas people just believe that of the Tories anyway.

Profile photo of Beryl
Member

Jo: I was tuned into the energy debate from The House of Commons this am and the question of Labour freezing energy prices was raised several times and the response was always that it would drive away competition [what competition?] and would lead to increased prices at the end of the period!

I don’t recall any questions regarding re nationalisation as I had to leave before it finished but if this went ahead I would imagine there would again be questions raised about competition keeping prices down and perhaps more importantly questions about increases in general taxation to pay for it which maybe wouldn’t go down very well in a pre election year. The aim was focused on the CMA to attempt to fix the broken market by re establishing competition and introducing more suppliers into it.

Profile photo of william
Member

With the wholesale price of Gas at a 30 month low, you’ve gotta love how some politicians are only talking about a freeze. I wonder when they’ll talk about a reduction. #theyhaventgotaclue

Member
Ken says:
17 April 2014

Nationalisation solves nothing, except maybe to protect an inefficient industry – we need competition within a diversified industry producing energy in a variety of ways which does not make the UK hostage to Russian politics, US shale gas, Middle Eastern oil etc. That requires a government led energy strategy.

Member
Ian says:
3 May 2014

What competition?
The UK is known as Treasure Island.
We are charged for goods and services what they dictate to us, because we don’t say NO, unlike other countries.
Funny, this week in the papers, the big FOUR Supermarkets are losing customers to Aldi and Lidl and they are now reducing there prices to get them back. If they can react quickly, why can’t the Energy Companies do the same.
Especially when wholesale Gas/Coal and Oil prices drop.
That is COMPETITION.
Before privatisation we all paid the same and the taxes paid for new Power Stations to meet the new demands, in this ever growing population, of ours
The majority of Energy companies who run and distribute the energy in the UK are foreign owned and they can hold the government to ransom, if they want to invest in new Power Stations or not, at a price.
We are the envy of the world, we have invented over 80% of technology what we take for granted over the years in one way or another.I agree that we need to look at alternative energy resources and not be, so dependent on other countries to supply Gas/Coal etc.
TECHNOLOGIES
RUBBISH – God knows how much we throw away
WAVE – We live on a ISLAND
SOLAR – It doesn’t need the Sun on it all the time
NUCLEAR – ?
These can ALL contribute to Heating and Lighting.
If these can reduce costs, we do not have to rely on other countries to supply and hold us to ransom.

Member
Jo says:
3 April 2014

I didn`t hear the energy debate but exactly….what competition? We all KNOW they`re in it together (to coin a phrase!). I think people would be happier to pay more tax, a fair tax, than these haphazard very high energy price increases and railway fares also, if nationalisation of railways was promised. All the rest is messing about and not making any significant difference. As I said before if Milliband was BRAVE and focused I believe the marjority of people would respect it and support it….or at least enough to win the next election! He`s got to do something, with his lead reduced to 1 point now.

Member
Ken says:
17 April 2014

It is essential that this inquiry looks at the generating subsidiaries to get to the root of energy pricing. However, for several years we’ve been told we are approaching an energy crisis so the timing of this this politically driven inquiry is worrying. If we are to believe the newspapers Ed Milliband single handedly stopped all capital investment in the energy industry with a single political statement. Who is responsible for ensuring we can keep the lights on at an affordable price, not just for retail consumers, but also for the high energy consuming industries that we need to keep in the UK if we are going to have a recovery in manufacturing providing import substitution if not exporting.

Profile photo of malcolm r
Member

The Government is responsible for ensuring that the energy companies see a benefit in investing in the UK – they are limited companies with shareholders and whether we like it or not they do not have to build new power stations here if they see an uncertain future. Irresponsible statements do not provide this confidence, particularly with an election in the offing. We need a long term energy policy on which all political parties agree – responsible politics rather than point scoring.

Profile photo of malcolm r
Member

Whilst I have my own views on charging for energy, my faith in Ofgem’s ability to work hard for consumers is not enhanced by this letter responding to the EU. https://www.ofgem.gov.uk/ofgem-publications/87427/ofgemsresponsetotheeuropeancommissionsretailmarketconsultation.pdf
It seems a wishy washy document missing simple, positive proposals. And some negativity – what is wrong with putting consumers’ previous usage on bills? Why wait for “more detailed data from smart meters” – years away for most of us. And why brag about the referral to the Competition and Markets Authority? It’s taken long enough to do that, and another couple of years before anything might result? What do these people do with their time – we need the energy market made clear and open sooner, not later. Or maybe it’s just the way European politics works. A pity we can’t take a lead and drive change through the EU.

Profile photo of wavechange
Member

From the letter that Malcolm has provided a link:

“CONSUMER PARTICIPATION. Consumers have the information they need and have the confidence to switch product and supplier if the service, there offering or the price they are given is no longer the best for them. Where customers are vulnerable or unable to engage, they should be appropriately protected and not suffer undue detriment.”

I have been hoping that attention would be paid to those who are vulnerable or unable to engage, so this is encouraging.

On the basis that many are simply confused about energy pricing and are paying more than they need to, I think we need to pay attention to their needs too. Energy is a vital requirement in a civilised society, not a luxury. We must think about consumers before the shareholders and salaries of company directors.

I very much support what Which? is doing to try and sort out this mess.

Profile photo of malcolm r
Member

“Where customers are vulnerable or unable to engage, they should be appropriately protected and not suffer undue detriment.” Agreed, but exactly what do Ofgem propose to do about this? It’s OK making general statements like this to placate the consumer, but we need concrete and practical proposals to back it up. We could then all use sensible tariff structures without the concerns of disadvantaging those not on the internet, or those unable to assess their best deal.

Profile photo of Beryl
Member

On a more positive note this letter demonstrates Ofgem ARE addressing the energy concerns of British consumers to EU Commissioners as a result of an intensive investigation.

There is no indication however as to who is going to fund the introduction of smart meters. Will consumers be given a choice to pay upfront or can we expect a further increase in energy bills to pay for them? I suspect Malcolm that by failing to put consumers previous usage on bills is a ploy to ‘encourage’ consumers to accept the imminent roll out of smart meters within the next two years.

My main concerns are the situation in Ukraine as President Obama continues to impose more sanctions on the Russian ‘elite’ which now includes energy CEO’s responsible for supplies to Europe and the effect it will have on prices.

Profile photo of wavechange
Member

Smart meters are a very contentious issue. Some of the reasons for avoiding them are not valid but the cost of the roll out is huge. The same applies with building more wind farms, when what we really need is investment in renewable energy sources that are better suited to producing energy when needed and not just when the wind is blowing.

Profile photo of malcolm r
Member

Beryl, the consumer pays for (or at least substantially contributes towards) smart meters, up to £28 on your bill by 2020. These will give the possibility of charging consumers different rates each day depending upon time of use. The hope will be to shift some consumers away from peak times – particularly the 6:00pm cooking slot, even by an hour. This would help even out demand. Consumers would need to be well organised to make use of the advantages of this, but the benefits – a potential 400kWh a year saving – are worthwhile; advantages to the industry are more uniform demand.
Renewable energy could be provided by wave and tidal energy – something we are well-supplied with as an island nation. But where is the effort? I’d rather see money spent on this than other dubious projects.

Profile photo of william
Member

“There is no indication however as to who is going to fund the introduction of smart meters. ” I think you’ll find we’ve all been paying for it over the last few years. I believe the idea was that the energy companies would be funding it, but as we all know, that just means we will.

Even though the rollout hasn’t really started I know some companies have already been training engineers. The last I heard was that the chances are that the rollout will be to install a shell into which each energy company can simply plug in their device so if/when you change supplier its just a simple unplug and plug the next one in. Getting to that point has been one of the reasons behind the delay , e.g. getting all companies to agree, Its amazing what you can find out just by talking to the engineers whilst they’re replacing your economy 7 meter with a standard meter 🙂 Although I can’t guarantee he wasn’t having a laugh at my expense,

Profile photo of wavechange
Member

If that is true then someone needs to work out that there should be no need to replace a smart meter when switching supplier. Let the companies take some time to realise that and postpone the roll out for the time being. 🙂

Profile photo of william
Member

That’s fine in theory but practice will probably mean different energy suppliers will use different smart meter manufacturers, and that means no standards other than the all have to fit into the same carcass.

How long have mobile phones been around? And its only now they’re heading for a standardised charger. Although that’s still a few years away,

Profile photo of wavechange
Member

I don’t think competing companies can be relied on to agree a standard. It needs an organisation such as the government to make an informed decision and the companies to comply. That will take time and hopefully delay the roll out until genuine criticisms have been addressed and the installation of smartmeters made much more affordable.

Very much though I support the introduction of a standard phone charger, it does need to be fit for the purpose. I understand that the recommended version is fiddly to plug in and like a USB connector will only fit one way.

Profile photo of malcolm r
Member

Ofgem’s original document says:
“The enduring solution
4.7. As discussed above, the Smart Metering Programme is introducing new industry arrangements to support smart metering that includes the specification for smart meters and the central arrangements under the DCC that will allow suppliers to communicate with them. Smart meters operated under these arrangements in accordance with the Smart Energy Code will be fully interoperable; the new supplier will be able to take over the operation a smart meter with no loss of the core functionality and maintenance of services for customers.”
So it seems your smart meter will communicate with your energy company through the (central) Data Communications Company (DCC). No reason to expect to have to change meters, therefore. Meters will meet standardisation requirements, irrespective of manufacturer/supplier..

Profile photo of wavechange
Member

DECC has a specification for these devices. That should avoid incompatibility but not with earlier models. It is common sense to start with a standard and stick to it. We also need to consider the concerns about smart meters and ensure that those that are valid are addressed before proceeding.

Out of principle, I don’t want a smart meter until we see a professional approach and also cut the cost to the consumer. Many people are struggling to pay their energy bills at present and what they do not need is to have to pay the cost of the smart meter rollout.

Profile photo of Beryl
Member

I understand there is no legal obligation at present for anyone to have a smart meter fitted.

Profile photo of wavechange
Member

That’s my understanding too, Beryl. My objection is simply on the basis of the cost of the roll out, which has been discussed in earlier Conversations. I have no objection to anyone having a smart meter if they pay for it and the cost of installation, but I don’t think it is right that the cost of the roll out is just added to everyone’s energy bills.

Profile photo of John Ward
Member

When we moved into our new house in December 2012, an E.On customer services rep told me that it had been a requirement for some time for every newly-built dwelling to be fitted with a smart electricity meter but that for some inexplicable reason that did not apply to gas meters. I’m not sure this is the whole truth, although it is possible that the government has made it compulsory; I have a feeling, however, that it suits housebuilders to make arrangements with a single major energy company to provide a supply to all of their properties during construction and the energy company then understandably decides that they will provide a smart electricity meter in each separate dwelling as a way of capturing those future customers. I was also told that we would have to pay for a new meter if we decided to switch to another electricity supplier; this does not seem to accord with the government’s wish to open the energy market. Certainly, there must be a standardised installation facility for smart metering although I can see the potential for fraud and misuse of supplies if meters can just be plugged in and unplugged [I presume the base housing will have to be capable of transmitting a report in the event of tampering with the meter and some physical means of retention provided].

Incidentally, although we have a smart electricity meter, we have never used the consumption recording device that was supplied with it. Our electricity consumption hardly varies over the course of the year and is insignificant compared with gas consumption so I haven’t bothered to activate the device; having access to the data is proclaimed as one of the consumer benefits of smart metering but it’s wasted on me!

Profile photo of wavechange
Member

Although I am opposed to mass installation of smart meters simply on the basis of cost, perhaps they could help suppliers detect those who defraud the companies by bypassing their meter or carry out other modifications to obtain energy without paying.

Traditionally, meters are protected from tampering by lead seals. When I moved into my current home the vendor pointed out that the seal on the main fuse had been broken several years before to install a new consumer unit. It was over 20 years later when the meter was exchanged that seals were fitted. The lack of seals and possibility of fraud should have been spotted by a meter reader.

As with the recent Conversation about Economy 7 meters showing the incorrect time, this serve to demonstrate unsatisfactory performance by supply companies.

Member
NO CHP THANKS says:
29 April 2014

If the regulation got loopholes, the firm will just find another way around to over charge consumers. Recent twist in energy market is the district heating thing which does not allow customer to switch and there is a lock in period of 25 years for ESCO agreement. Also, it is NOT even regulated by anyone.

So I am sorry to say, it won’t be over, just another way.

Profile photo of malcolm r
Member

Ofgem publish useful information on consumers’ energy bills. It is worth noting the components that are related to consumption, and those that are not, when thinking about charging regimes.
https://www.ofgem.gov.uk/electricity/retail-market/monitoring-data-and-statistics/understanding-energy-prices-great-britain/supply-market-indicator?utm_medium=email&utm_source=Office+of+Gas+and+Electricity+Markets+(OFGEM)&utm_campaign=4054004_Ofgem+Daily+Update+29%2f04%2f2014&utm_content=supplymarketindicatorstitlelink&dm_i=1QCB,2EW38,F31FFV,8RPZ6,1

Profile photo of william
Member

Under Network costs it states … “In the first 15 years after privatisation, charges paid by suppliers to transport energy to customers halved under our regulation of network companies.”

which is odd as in the last 15 years the standing charges I’ve been paying have only ever gone up . So something doesn’t add up.

Profile photo of malcolm r
Member

Energy transport costs should be covered in the energy unit cost, as they are directly related to energy consumption, not in the standard charge (which should be related to fixed costs).

Profile photo of william
Member

Isn’t even worse then? Cos I’m certain my and everyone else’s unit costs have only ever gone up, and that’s even though gas is at or about a 3 year low on the wholesale market too. I wonder what other “junk” I’m having to pay for.

Profile photo of wavechange
Member

You have been paying a substantial amount of money for wind turbines. Wind power can obviously provide a contribution to renewable power but there is no point in installing large numbers because they cannot produce power 24/7 because wind is so variable. As Malcolm has said, we should be looking at other options such as wave and tidal power. I appreciate that there is pressure to meet targets on renewable energy but when some people are struggling to pay their fuel bills we need a well thought out and cost effective strategy for energy supply.

The cost of energy is a major concern for many people in the UK. The mess that we are in is the combined effect of government (past and present) and industry playing with OUR money. Those who make the decisions have probably never had to worry about paying their energy bills.