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Why the CMA must deliver a fairer energy market

Energy prices

The price cuts from the Big Six come into effect this month. But our research shows that the energy market is still failing customers, with people missing out on savings of up to £400 a year.

Our latest analysis, ahead of the Competition and Markets Authority (CMA) announcement on its final remedies for the energy market, shows that Big Six customers will save just £30 a year when the latest price cuts come into effect.

That’s small pittance compared to the £400 they could save if they switched to the cheapest deal on the market.

We want fair energy prices

Over the last couple of months we’ve seen the Big Six providers (and some of the smaller ones too) announce price cuts to their gas prices. However, with dropping wholesale costs many will question whether these 5% cuts are enough. This includes thousands of our Fair Energy Prices campaign supporters, such as Susan:

‘Energy prices have been too high for too long. Something needs to be done now to stop us paying over the odds. We are being ripped off.’

Read more about how we calculated how much the Big Six price cuts will save customers compared to the cheapest deals on the market.

Paying over the odds

The disparity certainly seems to highlight why the energy market was referred to the CMA in the first place, with millions paying over the odds and society’s most vulnerable having to make difficult decisions about their energy usage during cold weather. Our supporter Lindsey sums this up:

‘It’s a disgrace that our most vulnerable in society have to make the choice of “eating or heating”. We are not a third world country and people shouldn’t have to live like we are.’

Although customers could save £400 a year by switching to the cheapest dual fuel deal, doing so isn’t always straightforward. And it can be out of reach for many, especially the most vulnerable. That’s why our Fair Energy Prices campaign is also calling for the process to be made easier for everyone. Paula told us:

‘Consumers need better information that is easily understood. We as consumers are at the mercy of huge companies as we do not understand global prices.’

Putting pressure on the CMA

We’re expecting the CMA to report back imminently and there’s a lot resting on its final proposals. So far over 360,000 of you have joined our calls for fair energy prices and today we’ve shared your stories with the CMA to demonstrate that the market just isn’t working.

You can read the dossier we shared with the CMA today, including a snapshot of stories from more than 30,000 comments here [PDF].

The CMA has a real chance to fix the broken energy market, to make switching easier and penalise suppliers who don’t protect the most vulnerable. It will be judged on the legacy of its recommendations and if it doesn’t deliver a fairer energy market, it will have failed.

We’re all waiting with baited breath, but we need your help to make a final push on the CMA. Tell them, why do you want fair energy prices?

[UPDATE 10 MARCH 2016] – After two years investigating, the Competition and Markets Authority has given its final verdict on the energy market. Read the CMA’s proposals and have your say in our new conversation.

Do you think the CMA will deliver fair energy prices?

No (76%, 8,736 Votes)

Don't know (18%, 2,020 Votes)

Yes (7%, 766 Votes)

Total Voters: 11,522

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Comments

I believe that the only time that we the customers will get a fair deal is when the energy providers are genuinely on the side of the consumer rather than their shareholders.
This will only be achieved if these energy providers are re-nationalised, then every consumer in the country will be a shareholder!

Adrian, while you wait for the next proper Labour Government to come along and do this, you might want to check out “The Co-operative Energy”. Which? says “it is owned and run by its members, who receive a share of its profits. If you are a customer, you can become a member for £1”.

We were with Cooperative Energy until we moved home three years ago and they were very good and, of course, ethical – but not competitive on price though. They are quite open about this and their aim was to match industry price levels over the longer term as they build up market share. Unfortunately they still do not have the buying power to match the big six on input prices and their business model is not tolerant of the economies and commercial practices of the majors so The Cooperative Energy will never have the sharpest deal in town. Nevertheless, I endorse Derek’s recommendation to check out their offering – there might be something that suits you and you might find their approach more honest and agreeable even if a touch more expensive.

I’m now with Ovo, which has not been competitive in the past but seems OK now. At present it is a UK company and so far I am very happy with their service.

No I do not believe that anyone will lower gas and electric prices for customers, I also have to struggle to keep feeding the meters every week, I am a Vulnerable Lady with a lot of Health Conditions and need Constant Warmth etc especially during freezing Cold months and am Registered Disabled with Medical Proof of my Conditions/Disabilities but No-One gives a shit about that do they so long as, the Energy Companies/Directors etc are getting their Hundreds ofThousands of Pounds every Year and they get Free Everything us, Genuine Customers are Continuously getting Punished,, its not Humane the way we are being Treated, its actually going against our Human Rights to be treated so Poorly!!!

Mark says:
7 March 2016

In the twenty-first century humankind should have evolved sufficiently to have a centralised national/continental/global energy system. We took a huge step back from such rationality with the privatisations of the Thatcher/Reagan years. Why are we expected to spend our lives constantly searching for the “cheapest” gas/electric/telephone/insurance contracts. They should all be publicly owned and run for the benefit of all. Those who think this is unattainable want to hold us back in the nineteenth century. Laissez-faire capitalism has exhausted itself and is exhausting the planet. We need to advance, not regress.

To justify their fantastic salaries, the CEOs and their executives should should pay attention to the requirements of their customers welfare as well as their staff and shareholders. After all, it is the customers who provide the revenue which pay their inflated salaries.

CMA could make an enormous difference to the energy market. The big question is ‘have they got the stomach to stand up to the Big Six’? Sadly the record of similar market regulators – Ofwat, Ofgen, Ofcom – does not inspire confidence at all.

Something to consider with your bills if you plan on changing tariffs. You’ll use much less gas for heating in the spring to late summer than in the cold months. So choose a tariff with cheap electricity even if the gas is higher. When winter approaches you’ll then need to look at the cheaper gas offers.

On that basis, perhaps we should all change tariffs twice a year. If that involves using a switching service then the costs will be shared with other customers, including those who stay with the same supplier.

There is no need to use a switching service. If you want to minimise your energy bill find the cheapest appropriate deal (from Which? Switch for example) and then go direct to the chosen supplier.

I am well aware of this, but many do use switching services and those that do are costing us money.

Switching saves individuals money, particularly those who are still on standard variable tariffs. Others can save by changing their existing tarffs either with their current supplier or to a new supplier. Which, Ofgem, and others try to help people to make savings by encouraging them to switch.
Which? says, among other things, “The CMA has a real chance to fix the broken energy market, to make switching easier…….” Perhaps as Which? makes money when you switch with Which? it should recommend using its service only to find the cheapest deal and then to go direct to your chosen supplier. As a consumers’ champion Which? would surely not want to make money from the energy switching market, thus pushing up prices, at the expense of consumers, would it?

Even with a single switching service run without making any profit, there would still be charges that have to be absorbed by all users. I would like to see these charges paid for by they person using the service. I used Which? Switch several months ago and I would have been happy to pay, rather than expecting the needy to contribute to the costs of a service used for my benefit.

The same sort of cost would apply if you switch banks, broadband providers, house or car insurance, take out a new credit card. Would you like to see everyone charged an initial fee when you do this to cover the cost? Would it be popular if Which? ran a poll?

Yes I would, Malcolm, but it would have to be accompanied by companies not charging existing customers more than new ones. I did have an insurance policy that identified the set-up charge in the documents. I suspect that if given the full facts, others would support people paying for the services they use. I recall when the commercial world valued loyalty, but rarely see this outside small companies these days.

Applying a charge to everyone setting up a new account, in energy, insurance, banking, credit cards and so one would set up another barrier to change and reduce even further the number of people “engaging” with the markets, contrary to what most think we should be doing. I would prefer to see people being encouraged to seek out the best deals without the penalty of a payment to exercise this choice. Absorbing such costs into admin seems preferable to deterring people from making savings.

Maybe you are right. Most people buy a mobile phone on a two year contract without thinking if the overall cost might be lower if they bought the phone outright.

On the other hand, there have been many complaints about price hikes on insurance premiums, particularly where the cover is simple (e.g. breakdown cover) and it is easy to see that loyalty can be costly.

Don’t forget that there are some who cannot engage with the markets. Pity help them because the commercial word will not.

The CMA being a tool of the David, bankers boy, Cameron wil never have the power nor will to force the electricity companies (and government and EU) to lower electricity prices.

Anyone on the Conversation a Good Energy customer who fancies going on breakfast TV on Thursday to talk about switching. service and what difference the CMA might make? Ideally with a family …. Let me know if so!

Lorna says:
8 March 2016

Ofcourse they’re not going to make a difference. We have been hearing sad, sad stories like this for years and no Government Body or anyone has made an effort to deter these Industries from making BIG BUCKS out of the least well off. You even pay a higher price for your energy if you have a Key Meter??????

Here is a link to a 2014vsurvey entitled “Customer Engagement with the
Energy Market: Tracking Survey 2014”: https://www.ofgem.gov.uk/sites/default/files/docs/2014/06/customer_engagement_with_the_energy_market_-_tracking_survey_2014_final_published_26_6_2014_0.pdf
For those in non-rented property, only 26% have ever changed their gas supplier and 23% have switched their electricity supplier. For rented property, the figures are 47 and 45%, respectively. Hopefully the ‘poor engagement’ with the market for those in rented property will be partly due to short-term lets.

For various reasons, the majority of the population are not engaging with the energy market. Perhaps simple prices – as we see at every petrol station – will make it easy for everyone to choose their energy supplier.

Most people have to balance two costs – electricity and gas. They need their annual consumption of each to see which package is the cheapest. So “simple” is not like visiting the petrol (or diesel) station. And since having just a unit price is going to disadvantage certain vulnerable users indiscriminately, it is not fair. However if you want such pricing then the choice is already available – just go to an energy company that offers it.

The lack of engagement was shown to include a large proportion of people who were quite capable of working out their saving, and more than capable of switching, but just did not bother.

For most people it is very easy to check your best deal, either online or by phone. You just need to know your likely annual consumption, a figure your current energy supplier has given, or will give you. A service such as Which? Switch will do all the calculations necessary to yield all energy suppliers current costs from which you can make your choice. The cheapest? A preferred supplier? Up to you.

You say that having simple pricing will disadvantage certain vulnerable users indiscriminately, but what about those who will benefit by being able to understand the charges made by energy suppliers?

Maybe we should ask the citizens of this country whether they would prefer to stay with the current complex variety of tariffs or have simple unit prices that don’t need websites or phone enquiries to compare prices.

An annual fixed amount – standing charge, which for some suppliers is zero – and a single unit price for each of electricity and gas. There must be something badly wrong with us if we find that too complex to deal with, particularly when it is all done for you online. I despair for we Brits (and others) if that is beyond us.

However, Ofgem and CMA seem to have dismissed (or at least not thought worthwhile) the idea of having no standing charge. All relevant groups have had the opportunity to make their views known but if the majority of consumers wish this to change, then maybe it will. My only plea would be to present the facts and not tell half the story as has been the case in one or two presentations up to now.

I would have thought it better to find improved ways of helping the vulnerable, providing fairer deals for those on pre-pay meters, examining more closely the real costs in energy bills – wholesale cost, transmission charges, government-imposed “taxes” – and get all this clear. I’d also like to see someone publish independent “benchmark” prices so we can judge whether our energy companies are giving sensible deals or not.

I bet half the residents in non-rented property who have not switched have had a look at other companies’ tariffs and decided they are alright where they are. A lot of people who changed from a standard tariff are content with their choice of supplier and the simplicity of switching internally to new versions of their tariff as they become available. There is a widespread feeling that once having made the major switch of tariff type there is not a lot to be gained in the long run from further switching between companies. Then there are lots of people like me who have almost run out of decent companies to deal with.

John, That’s true. But it surprising how many have not bothered to change from (expensive) standard tariffs.

There are many reasons why people stay with the same supplier but from what I have read there is concern that some are paying considerably more than they need to for their gas and electricity, and some can ill afford to do so. Years ago I did not understand why most younger people did not do mental arithmetic, but now I accept that there are people who use a calculator. I believe we owe it to fellow consumers to make life as uncomplicated as reasonably possible.

I entirely agree, Wavechange, and the more tariffs there are the more chances there are to end up on the wrong one.

I sometimes wonder whether paperless billing contributes to this problem. I guess a lot of people do not actually study the bill when it becomes available on-line, and trying to retrieve the billing history can sometimes be quite difficult. At least with a pile of paper bills it was possible to line them up and do some sums to get the cost and consumption figures.

I confess to printing off my bill, as I do bank statements. I find it much easier to check them, and flick through older ones if I feel the need.

I haven’t gone paperless on bank statements yet. I like to have something authoritative that proves that I live where I say I do and a lot of places won’t accept printed copies for that purpose.

You are right, John. It was easier to keep a track of bills when they arrived by post and were filed away after inspection. On the other hand, energy suppliers’ websites seem to be providing an increasing amount of useful information, which is good for anyone who is no good with sums – providing that they look at it.

I like the way that Vodafone sends me a monthly message to say what my next bill will be, so there are no surprises. Ovo sends an email but I have to log on to check what the bill will be.

Dee says:
9 March 2016

As usual Which and 38 degrees are perpetuating myths about the huge profits that the big six are making. They are not, Power has just announced 2,500 jobs losses from its retail sector and Eon in loosing billions of pounds.

The fact of the matter is that we do actually have to pay for electricity it does not just happen.

When it comes to finding a tariff that suites you there is plenty of choice out there – virtually everyone seems to be able to choose between Sky Sports and BT sports but when it comes to the important things in life people suddenly decide it is all too difficult. (If you do not have online access changing anything – car insurance, telephone services, utilities – is almost impossible now – a fault of politicians and private companies alike who simply wish to cut off the poorest and most disadvantaged in society by withdrawing all written and telephone services – now that is something Which could make a fuss about!).

At any one time the energy companies are carrying bad depts of some 50 million pounds from the great British public. That is those who will not pay their bills, who’ve moved without leaving forwarding addresses, those who are daft enough to bypass the meter and so on. Those of us who do pay including those on low incomes are subsidising those that don’t.

In addition, the price that we pay is made of of many elements, the fuel that is used to make the electricity, the cost of generation, various complex and ever changing subsidies for green fuels, transmission costs, those in genuine fuel poverty, warmer home initiatives, the cost of maintaining accounts and call centres and so on and so on. In truth if any of the Dragons from the Den were to be asked to invest in the electricity market they would laugh in your face because there is just too much risk and not enough financial gain. Yes the smaller suppliers are cheaper but as they grow they will become larger and have to charge more for their electricity as the cost of the subsidies they will have to make grow in line with their size.

The market is far too complex and suffers far to much meddling from ignorant politicians all looking for a quick vote. The big six have undoubtedly made bad mistakes in handling many customers, in sales and after customer care and they need to improve their game enormously but trying to find cartels and price rip offs when their are none and then blaming the regulator because it cannot find what does not exist is below the dignity of Which and calls in to doubt the veracity of its other campaigns.

You have a point Dee. knowing your opinion of nuke power stations the government envisaged Hinkley monster one (of two) to be built by that major French company has just seen its financial director resign and comments coming out France are that its not “economically viable ” and would “bankrupt the company” which the major shareholder is the French government . Cameron ,of course ,is “all for it ” .

More needs to be done to support price reductions for electricity in those areas where no gas supply exists; all-electric households are coming worse-off where price reductions have been only to gas users. Surely lower wholesale oil & gas supplies should have positively affected oil-fired and gas-fired power stations generating electricty, so why haven’t we electric-users also seen corresponding reductions. It’s not our fault we’re all-electric, and heavy users being as heating our homes & water relies on electric. Companies have always been quick to increase electric tariffs, so it’s time for us to be assured we’re not paying over the odds.

Electricity seems not to have been subjected to the same reductions as gas for a number of reasons. Lack of capacity means bringing in expensive standby plants – diesel for example. Carbon price applies to electricity but not gas. Renewable subsidies presumably increase overall costs.

The other options seem to be a white (economy 7) meter at around 5p or so a unit for storage heating (c/w gas at around 2.8p), calor gas or oil for heating

Hello everyone, after two years investigating, the Competition and Markets Authority has given its final verdict on the energy market. We’ve summarised its proposals here: https://conversation.which.co.uk/home-energy/cma-energy-market-investigation-results-proposals/ We’d love to hear what you think and vote in our new poll.

r. carroll says:
11 March 2016

this government is allowing the big six to fill their pockets time and again, it makes you wonder who else has their nose in the dirty trough

EMC says:
16 March 2016

Yes, it is difficult and I agree that the price of gas and electricity should be lowered considerably, thus allowing us mortals, especially the older people to live a little more comfortably and not fill the fat cats pockets!!! Hopefully they will hear our pleas.

It would be useful if people put some numbers into this conversation. For example, a medium dual fuel user, if with the tariff I use, would pay around £760 a year. A pensioner would get a winter fuel allowance of £200, so would pay effectively £10.80 a week for fuel. I would expect they would pay at least 5 times this for food. So I wonder just how much you’d expect energy prices to fall to make a big impact?

Anne Liversidge says:
20 March 2016

I think the main problem with all this type of enquiry and decision making is that the people who are involved with it do not really understand what it is like to have to live (exist) on a low income. Before they do anything, they and all the MP’s should have to spend three months living with a low income and no savings or extra money from anywhere. This time should also contain at least one child’s birthday, or to make it really fun Christmas. Then lets see what they class as fair!

Anne -you are obviously a very polite person –quote-the people who are involved with it do not really UNDERSTAND what is is like to live (exist ) on a LOW income . I personally wouldnt be as polite as you but would put the plain FACTS of living in a fuel poverty society . This should not be covered up by double talk by politicians and others.

grumbler says:
22 March 2016

Which energy comparison site
The site has an inbuilt fault. It uses your current suppliers standard rate, normally the highest, to compare with the the lowest rate available and this will always favour switching even if this might not be in the consumers best interests.

grumbler, I am asked for my current supplier and tariff on the Which site and it uses that to make the comparison. If you are on a fixed rate tariff that is due to expire within 12 months then it will warn you it cannot make a comparison for the remainder of the 12 months as it does not know what tariff you might switch to and I think then it adopts the standard variable tariff. It is probably then easiest to enter the best tariff your supplier offers that goes beyond 12 months.

grumbler says:
24 March 2016

They choose to do that they don’t have to. They could do the lowest of current provider that would make more sense. I would imagine most people think about switching when their current tariff nears its end, so to assume people will choose to go onto standard tariff is just lazy and misleading by Which as is so much they do,

Yes, they could do it differently but I don’t think any deceit is involved, just a way of dealing with an unknown situation. I get a warning of what is happening.

In “This Month’s Conversations” – Which? mag. April, “From Facebook”, under the intro “Why are energy suppliers only cutting their gas prices by small amounts”…….. a contributor says…..”If prices fall by 31% then bills reduce by the same – it’s not difficult is it?”

As energy only forms around 40% of a bill, then those bills would reduce by about 13% (forgetting forward buying etc). It is strange that Which? should not make this clear to avoid readers being misled. It does comment objectively on letters on the adjacent Feedback pages so why not here?