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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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my bill came through the door yesterday fron N POWER for gas and electric and it is over £400.00,its disgusting never in my life have i had such a big bill and i am retired aged 63.i am changing supplier as N POWER never call and check meters,it is an estimated bill and far above what i have used,at least with british gas they come and check meters before sending a bill,although i feel even with them the prices are way too much but in comparison with n power they are better.

Laura says:
4 March 2016

Why don’t you read your own meter and send them the readings? It isn’t rocket science to read a meter, is it?

I read and send my readings every month and guess what the price i pay is not consistant, as for the standing charge its another way of ripping us off.

That’s probably because you use differing amounts of energy each month Brian.
If you check your yearly usage, calculate what that will cost given your tariff then divide by 12, you can elect to pay by direct debit tyhat monthly amount (fixed) each month.
That’s NOT rocket science.

Correct Laura. God knows why you’ve got -10 likes
It’s -9 now.

J.C. Coyle says:
6 March 2016

No, but single pensioners with arthritis, hip and knee replacements etc, cannot get to the meter to read it. If I knelt down on the floor and was unable to get up, it could be a week before anyone found me there.

phper1 says:
4 March 2016

Change to somebody else. I am with ‘EBICO’ and every time I make a comparison, to see if there is cheaper dual Energy(Gas and Electric combined), I am told to stay where I am. This is not an advert. This is fact and my own experience. Good luck.

I to have been with EBICO for over 4 years and despite regular checking on comparison sites, I have found no reason to change my supplier. Despite this, due to the way I am employed I find myself in periods of unemployment. Due to being at home whilst being unemployed and therefore increased usage, this is yet another way that disadvantaged people end up with a larger bill.
Do yourself a favour.
Check out EBICO on a comparison site.
I first came across them on the Which site, I did check with others as I was amazed at the savings.

Peter says:
4 March 2016

I switched to First Utility (Utility Warehouse) sometime ago and looked liked saving approx 25%.
I have ‘signed’ the partition but…….
surely the problem is that the private energy companies are in business to make money. To opoerate they have to make large investments and service capital and shareholders etc. Each of the ‘Big 6’ also employ many, many people trying to pursuade us to change to their company
These companies were created as part of the ‘Thatcher’ initiatives! When confronted with questions about the cost of energy – his solution is “…. SWITCH….”
There is no real government policies to change this model — QED

Margaret – take the actual meter reading yourself and then ring it through to Npower. They SHOULD recalculate it based on the reading you have given them – then re-issue a revised bill. DO NOT pay the estimated bill

This government and the useless Ofgem should get off their backsides grab the energy companies by the scruff of their necks and say enough! If wholesale gas / electric prices drop 10% then so should the retail cost to householders. Also it should be part of their licence to trade that they read the meters at least twice per year and carry out an annual check on those meters to ensure that they are working and regulated properly. Too many times ordinary folks are faced with massive back bills because the energy companies meters (and they are ‘their’ meters NOT the householders) are faulty or they have not been read for years and the bills are under charged which is not our fault. Their fault, they have to accept the loss!

a 10% drop in wholesale price should result in a 4.2% drop in the retail price as Ofgem and the industry generally agree that the cost of the gas itself accounts for 42% of their total costs. They have staff costs, profit, green levies, distribution and Transco costs etc.
There is already a legal requirement on meters being read once every two years.
Energy companies can only claim loss of income from charging too little for one year backwards. They can charge form more however if the fault is deemed to lie with the homeowner.
There’s nothing to stop a homeowner reading the meter and providing those to the supplier.
If the meter is faulty and can be proven to be so then any loss on your part can be recovered through legal action.

I think the Standing Charge should be abolished, hundreds of pounds before you use any energy whatsoever!
The tarriffs leave you feeling mugged in your own home, while energy companies make record profits as wholesale prices are at a record low! “Tell Syd to thank the Tories!!”

The standing charge should cover those costs that are fixed, not dependent upon your energy consumption. For example, cost of preparing your bill, reading your meter, maintaining your connection, smart meter cost and. most probably, some of the government-imposed levies that form part of your bill. I do not see why some should contribute more to these costs and subsidise others.

However, there is a choice. You can join a supplier that does not make a standing charge, but simply charges per unit. See if that is cheaper for your consumption.

My supplier uses a standing charge; it is not hundreds of pounds, but £104, just £2 a week. The only people who might find that charge excessive in practice are those ultra-low users who will have very small energy bills, including people with holiday homes.

My standing charge works out at £200 per year for electricity and gas. It is not difficult to see that standing charges are arbitrary and do not reflect the actual cost of anything.

Get rid of standing charges and let us help those who are struggling to pay their bills.

I suggest you change your supplier (try GB Energy), or choose a unit only tariff.

We have discussed this in many conversations. I believe the standing charge should reflect only those fixed costs that all consumers should pay. If you put all these fixed costs into a unit only tariff. low users (including the wealthy, out all day, holiday homer owners for example) will pay less than their fair share, and the high users (poor quality housing, all electric, infirm requiring round the clock high levels of heating, large families on the breadline) will pay more than their fair share. Fair? I don’t think so.

There are the reverse cases of course – wealthy high users, poor low users. But the point is the proposal will be totally indiscriminate in who gains, and who loses. Fair? Still not.

“It is not difficult to see that standing charges are arbitrary and do not reflect the actual cost of anything.”

Forgive me for doubting your statement but honesty does not allow it to go unchallenged. There may always be arbitrary judgements when apportioning costs in any accounting situation but I am sure you cannot deny that all companies have to pay to the national grid systems. There is also the cost of all the fixed assets like cable, gas pipes and the associated maintenance costs. If it will help you I do have research paper on the expected life span of various electrical equipment from sub-stations to the poles for overhead electric cables.

The fact you are paying this standing charge – does this mean it was in the tariff you chose? We chose our tariff for overall cost so the fact or standing charges total £90 is just incidental.

I repeat the argument that if people can afford to go substantially off-grid then fewer people will actually have to pay more by unit to cover the shortfall as the off-gridders will be using very little power.

If Which? was to do something useful now to help people reduce costs then perhaps it could adopt the programme idea where several EU consumer groups are going to manage a massive [10,000] solar installation . The idea that a consumers association holds the hand of multiple people installing modern systems making sure the price, installation and economics are all well monitored I find very appealing.

The French idea that the capital cost of efficient heating systems should set against income tax would be a real boost to improved heating in the UK.

phper1 says:
4 March 2016

I used to pay £0.32/day, as Standing Charge, for my Prepayment Gas meter, with British Gas, for 8 years. I was not aware of that, as I rented the flat from somebody. It was not until I went on holiday and, on my return, I found out there was no Credit in the meter, although I knew I had Credit before I went on holiday. I rang British Gas, to ask why? It was only then I found out why the meter credit finished, without using any gas. They told me there was a 32p/day S.c.. I worked out that, for just over 8yrs. I paid over £950 . God knows how much my predecessor(s) had paid. So how much a Gas Meter???? Now, if I go in a restaurant to eat, they don’t ask me to contribute towards their furnishings. If I go to a shop to buy an item, they don’t ask me to contribute towards their rent or their Council tax. It’s all in the price, AND they give me a receipt, without asking me to pay a contribution towards the cost of the receipt.
So, why don’t the Energy Companies give me a CLEAR cost of what my gas or Electricity is? They should tell people, whether they ask or not , if they are on a Standing Charge, and how much it is. And why should they charge for producing a bill for you, but they don’t if you pay them with a Standing Order. They pass the can, for that, onto the Bank.

With rented property if you run-up a large bill with your supplier and then “flit” without paying the landlord gets the ultimate bill. It’s therefore easier to install pre-payment meters and let the energy supplier deal directly with the tennant. The tennant consequently pays a higher rate.
I would have thought an initial deposit payable by the tennant at the start of the rental for energy usage would have been a better approach. The tennant and the landlord could both receive bills. Should the account balance approach the deposit amount the landlord would provide notice to both the tennant and the supplier and the supplier would revert to pre-payment terms if the account is not cleared within an agreed amount of time.
Good tennants would therefore enjoy cheaper fuel and landlords would avoid the possible costs from departing tennants leaving large, unpaid bills.

I’m not struggling to pay my bills, Malcolm, but I do care about those who cannot afford to heat their homes adequately. Many of them are living in rented accommodation rather than in their own homes.

Standing charges subsidise high users and penalise low users, which is unfair in my view. There will be high users that are struggling, but benefits are available to support those who have a genuine need.

Second home owners are sometimes low users but it is not an insurmountable problem to ensure they are not being subsidised by those with a single house. In April, second home purchasers will have to pay additional stamp duty.

I do not want high energy users with plenty of money to be subsidised by low users and that is what is happening thanks to standing charges.

Dieseltaylor – I am not complaining about the standing charge I pay.

I have posted elsewhere that the vulnerable should have proper support from the State. It is not a private companies job to do this – I certainly would not want them to have the personal information necessary to do this properly.

I repeat, abolishing standing charges will be indiscriminate in who it benefits and who loses. Struggling high users may well not be entitled to any state benefits.

My standing charge is £2 a week. Comparing my tariff with a “social tariff” free of a standing charge, if I were a “low user” I save around £220 on my standing charge tariff. If I use half the amount of an Ofgem “low user” I still save around £70. Only if I use around a quarter of the consumption of a typical low user do I begin to make a small saving – so someone with a holiday home perhaps. You need to check your total annual cost with available tariffs – what matters is how much in total you pay.

Malcolm – You have never justified the fact that standing charges indiscriminately provide the rich with energy at the expense of low energy users who struggle to make ends meet.

That is not the argument. The argument is that abolishing standing charges and rolling the cost into units charges will be indiscriminate in who benefits and who does not. Wealthy people will both win and lose, and poor people will both win and use, depending upon how much energy they need to consume. There is nothing fair about an indiscriminate cross subsidy such as this would produce.

If you look at the real costs involved you will see that, in practice, standing charge benefits most people, unless they are very low users (below the Ofgem low user category). In principle a standing charge has justification. It is determining the costs that should be included in the standing charge that needs exploring. My view is that it should include only those costs that are fixed and therefore the same for every consumer, large and small. That makes for fairness.

It is my understanding the Govt does use private energy companies to extract green and VAT revenue prior to bills being sent out to consumers. What proportion of this is reimbursed to the vulnerable? Govt constantly argues the amount consumers can earn before they pay general taxation has increased.

Many young people are having to save on average £40,000 to buy there own home and pay someone else’s mortgage at the same time. No chance of State handouts coming their way.

The last information I have on Policy and Regulation costs is that on an average 2015 bill these amount to £164, of which £12 seems to be to support vulnerable customers. There were 16 policies that could impact business or household bills, and all seem to be subject to vat (a tax on a tax??)

There are no “Tarriff Only” plans anymore, I did have one with my online Dual Fuel The government imposed Standing Charges on all plans to implement the “Tariff comparison rate”. I pay £174 pa, for dual fuel, times say 20 million users is around £350 m.
Who’s side are you on Malcolm??

EBICO have a no standing charge tariff as do others.
The standing charge covers fixed costs borne by the suppliers irrespective of your use or not. That meter for example, has to be paid by someone. The pipes running under the street to your house. The electric that pumps the gas through those pipes. It’s not free.
If you have a car but don’t drive it – yet still park it on a public road then you MUST pay the vehicle excise duty.

Laura says:
4 March 2016

I asked my supplier OVO, to explain why they levy a 27p per day ‘standing charge,’ and what, exactly, I get for it? They have yet to get back to me on that one!
I think it’s a bit like the line rental charge for telephone and broadband that keeps going up each year, surely it shouldn’t cost £17.00 to rent a line per month? A reasonable line rental charge should be about £20.00 per YEAR!

If your energy supplier did not make a standing charge, the unit price would rise. You need to look at the overall package to see whether you are getting the best deal. I would be interested to hear what Ovo include in their standing charge. I have discussed the content of standing charges with Ofgem and they have no rules as to what should, or should not, be included. Should, for example, the governments levies – renewables, supporting the vulnerable, carbon tax, – be included or not? Should smart meters be included or not? It costs everyone the same to have their account prepared, their meter read, their connections maintained, but should everyone pay the same or should high users pay more (even though they may well be poor, sick, unable to reduce their usage)? I’d like to see Ofgem advise what standing charges should include.

You do have a choice of course. Avoid standing charges if you are against them for whatever reason by choosing a zero standing charge tariff, where you only pay for the units of energy you use (albeit at a somewhat higher price).

Sherida says:
4 March 2016

Having a standing charge just makes the UNIT charge effectively higher for low users or thiose who choose to use less for whatever reason.
Having a standing charge just helps encourage higher usage by in turn making the effective unit charge lower.
e.g. I have a water meter and I therefore economise on usage. I have paid around £8.50 per cu meter after all charges, sewage etc are taken into account.
When in Spain last year for exactly the same usage and treatment, sewage etc. I paid £1.40 per cubic meter. That was uin the Desert region of Almeria.

I do not pay a standing charge and also benefit from a low unit cost.

The line rental fee pays for the infrastructure costs of the entire network, the repair of same and the roll-out of new structures. If you want a ‘phone in your house or a broadband connection you have to pay a part of the total cost and that part should NOT be dependant upon the usage.
Same applies to standing charges for power.

The standing charge was brought in to help with the cost of the Suez Canal crisis 1956. The private companies should not be receiving this money. Why are they allowed six tariffs. Do you know what tariff you are on?. They should be like the petrol station if you drive a mini or a rolls you pay the same for the petrol they should advertise their charges so you can pick the company that’s better for you they also should only have one tariff. My daughter change companies then found she was know better off so she went back to the other company and they then started charging her more, when she rang them they told her she was using less gas so her Chargers were higher

Mr H Newcomb says:
4 March 2016

We were told that privatisation would lead to lower prices, WHAT GUFF! Just ended up like all privatisations, owned by governments friends and cronies, fixing deals with cartels in back rooms and getting extremely rich at the publics expense. Same old same old. I despair.

Emma Purnell says:
4 March 2016

Privatisation is never going to be cheaper as companies are never happy any more with the same profit as the year before. It has to be higher all the time as they need to pay their share holders and it seems it has to be forever more. Where is it going to end??

This is not necessarily true, Emma. With the privatised companies there is competition and pressure to work more efficiently, which did not exist prior to privatisation. Having said that, I am appalled how complex energy pricing has become and the growing involvement of foreign companies in our energy industry. My preferred option is to keep the companies but for the government to have much more control over their operation to prevent anyone from making excessive profits or working against the interests of the citizens of this country.

It is criminal that bodies set up specifically to protect the consumer are failing so abysmally in their task.

I believe the Energy companies should be required to provide simpler tariffs for the domestic market particularly single phase supplies however I do not believe energy companies should be expected to subsidies those less fortunate, that is a matter for the state to address

I have been invited by my LPG supplier to renew a two year contract for gas at 42p per litre. I searched for an alternative supplier and was quoted 31p. I went back to my present supplier and they said they would match this lower price and give me £100.00 credit. I would have been “ripped off” if I had not sought an alternative supplier and feel aggrieved that loyalty (I have been a customer for over 30 years) counts for nothing. I am now checking for the best electricity price. It is shameful that we have to go through all this messing around to avoid being cheated. I am especially sorry for those who, for whatever reason, cannot do the necessary negotiating to get a fair and proper price for their essential services. Insurance is another industry which needs to be more honest.

I’m a disabled grandma.
Quite simply, I cannot afford to heat my home.
It’s not a large home, just a 2 bedroom terrace.
I sit all day and night with my two trusty hot water bottles and a quilt.
This isn’t living, this is existing.
I don’t know what the government can do, other than cap the price per unit.
It’s pointless removing standing charge, the energy companies will just add it onto the units.

But something drastic needs to be done now!
Not wait for review after review. ….maybe one day, but I doubt it.

I totally agree. We also struggle to pay the extortionate prices. I am 66 my husband 76 and physically disabled, which means he can’t keep moving about to generate body heat. He regularly shivering with cold and in agony with his joints, so turning the heating down low is not an option for us. Paying the heating bills, which in winter are coming close to £500 a quarter, for a 2 bedroom bungalow, is like having a noose round your neck that you can’t escape from. It’s a constant worry of balancing the pennies to stretch to paying everyone, leaving virtually nothing for your own welfare, food, clothing, footwear and holidays just a memory as our money goes to pay for holidays of the already wealthy. It’s a case of much wants more, regardless of how it’s gained.

Sandra you are an excellent example of the need for a proportion of standing charges to help pay for updating your energy source and the insulation of your bungalow to increase its EPC rating to ‘B’ which should significantly reduce your energy costs.

Mr A Howarth says:
4 March 2016

A lot have a get out clause £20 to £30 ,may stop people switching even if they se a better deal

The energy market is a pseudo-competitive arena. It is well known that the big six companies operate a cartel-type arrangement. It is also very evident that these companies are quick to pass on price rises in the wholesale energy market, but very slow to pass on any cuts. I really hope that the CMA makes some positive far- reaching conclusions, but I’m not holding my breath.

Emma Purnell says:
4 March 2016

And if it is not bad enough that the energy companies rip you off to keep their share holders happy, the water companies are just as bad. I just received my bill for the next 12 months and as usual it is up from last year, in fact it has gone up 112% over the last 12 years. Fair??, I do not think so

How is it that I was able to reduce my monthly direct debit dual fuel payment by 33% by participating in Money Saving Expert’s Big Switch initiative? The annual savings are a whopping £674. I must have been grossly over-paying before. It’s scandalous that the main energy providers have been getting away with this level of over-charging.

I rather think that in a falling market ANY deal will be better than the previous one.

Having said that I am pleased you have gone for the BigSwitch. We have used it previously and we also have been shifting annually on our own account.

In France the Govt sets a base tariff which has reduced by 15% …
” March 1 marked the official start of a number of reforms, the key one being that the government regulated gas tariffs, tarif réglementé of Engie (formerly GDF-Suez) have dropped by 3.22% excluding tax.
The exact drop depends on the extent of use by the household (3.3% for those who use it for heating, 1.1% for those using it for cooking and 2% for those who use it for cooking and hot water).
Since January 2015 gas prices on these tariffs have dropped 15.4%”

David says:
4 March 2016

The poorest should not have to pay a higher rate. Switch away from the inefficient and immoral price-fixing big 6. People must be helped to use less and cleaner energy – climate change will not discriminate. The government should not have withdrawn support for renewables, which are needed throughout the country – the sun’s power is free.

“people missing out on savings of up to £400 a year.” Many of these will be people who do not change from standard tariffs. A positive move would be to help them to realise the savings readily available by switching tariffs.

“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.”
However do remember that if everyone switched, the “cheaper” tariffs would inevitably become more expensive. The vulnerable are protected by law.

“‘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.’” It is a disgrace, but private companies are not responsible to provide what the State should be doing – adequate social security to enable people to live decently. Would you expect Tesco and others to reduce their food prices?

I’d like to see an organisation look properly at energy costs (raw energy is 42% of an average bill) and all the other costs involved to produce a benchmark cost for gas and electricity that we can judge our own supplier against.

While the major energy companies are undoubtedly squeezing everything they can get from us, the users, I think that the government’s chaotic energy policies have led us into a situation where remaining established energy supplies are being sacrificed to the provision of so-called green generation before adequate provision has been made for maintaining the country’s energy needs. I believe this leads to a situation where the government dare not upset the energy generating companies, for fear that these companies would retaliate by threatening to withdraw co-operation in meeting heavy demands for energy at critical times.

Perhaps its time for a state run alternative as well as the private powercos, for folks on low incomes or benefits, that will deliver energy against a simple set of tarriffs. Said alternative wouldn’t be beholden to shareholders to generate a dividend and could use its muscle to drive the market. That is, if the government agencies could run it better than their usual floundering. (BIG caveat, I know)

Lee says:
4 March 2016

I just renewed with the same supplier and the tariff is in my favour. Using my actual energy use as a projection it will cost less for the year ahead than it did for the year and I was already on the best dual fuel tariff at that time. Knowing what I had paid for the last year, I knew exactly what I should be paying by monthly direct debit. Now factor in that the new tariff will save more money and that with actual meter readings calculating a final bill for the old tariff I was in credit by over £50 and you would expect my direct debit payments to reduce accordingly. Not so, the cheeky monkeys wanted to INCREASE the direct debits by some £20 per month and it was only by me insisting that they wouldn’t that I am graciously allowed to maintain my old direct debit payment. I reckon I’ll be around £150 in credit this time next year and no doubt they’ll try a similar trick again.

Frank Frankgate says:
4 March 2016

I top up a key therefore I’m paying upfront and can only use what I pay for . So no credit no guessing estimates , meter reading .basically no expense to the company yet always pay more per kw my own opinion is they think the poorest most vulnerable have no voice and won’t be heard .
Hopefully that will be the underlying grounds for major change as the rest of the country realise it’s rigged against them .

I am 80 years of age, and I am really very worried whether I can cover the expense of ‘living’ in the future – – I have been in PUBLIC SERVICE all my life, and now I feel that I desperately need a ‘helping hand’ – but will I get it – I am not sure !

t cattemull says:
4 March 2016

will moaning help? the big 6 as they are known are a law unto them selves and answer to no one,they will only give the people a reduction if theirs something in it for them,they don’t give anything away with out a reason.

Julian Simcox says:
4 March 2016

Just impose a standard billing template to make comparison easy for our largely innumerate population.