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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
Martyn Gibbons says:
5 March 2016

Since the conservatives privatised these nationally owned companies in the eighties against the public wishes & saying it wouldn’t be pushing up prices that much. It seems again that government champions the few in their wealthy circles to make even more money for both themselves & these companies. The Government should be working for Briton as a whole, they say they do but they are very sneaky and pass these bills under different names, look at TTIIP at the moment. I think the law should be changed where we, the people who pay the government to run OUR country have a majority rule vote on things like this. Because of privatisation we no longer move with the rate of inflation which was fair & just, now it’s the few who are selling Briton by the pound and killing this country, but don’t worry the rich will be ok, next they will find a way to charge us for air.
Rant over !

NJ Anderson says:
5 March 2016

Remove all substabies from the energy suppliers .. Legislate for all Fixed Charges to go back to the exchequer.. Also legislate for parity with & of prices to continental Europe.. Demand that all our roads & infrastructure that have been excavated & repaired & reinstated Tosuch a poor standard .. That the reinstatement has to be at a much higher standard & able to last much longer than at present ..

why we pay more compony are to greedy

There is a basic unfairness in the structure of most tariffs. Companies charge either a fixed monthly or quarterly charge or a penal rate for the initial number of Kwatts used. This means that the customers who use the smallest amount of fuel pays the highest average price for each Kwatt used. Cameron in his big house will pay substantially less per Kwatt than a single mother living in a slum. Is that fair?

Too many tariffs to choose from with each provider. Deliberate confusion no doubt. Gas is gas, electric is electric. All that is needed is just one tariff with each supplier.

Paul says:
5 March 2016

I don’t see how we can get a fair market as things stand. CMA is a quango with divided loyalties (industry/ consumer). What we need is not more soft-shoe shuffle but frictionless competition. So the switching process needs to be very simple, consistent and seamless so anyone can play. We will know we’re getting close when the majority have switched to the best tariff available.

Far too political to be of any use to the indigenous population of the country. It will be yet more smoke and mirrors by the firms involved and the government.

(Edited by moderators: We have edited your comment as it was all written in
capital letters. Please read our commenting guidelines for more information).

Eric Forrest says:
5 March 2016

Ask yourself why we are in this situation now,because thanks to Blair signing up to a fast track “green” energy policy with the EU instead of a gradual process, then failing to do the right thing (as always)to ensure our supplies,the Tories are left holding the baby and wrongly receive the blame as do the energy suppliers.Need i say more about the consequences of so called Socialism (tax and spend without responsibility).

Not until the last tory has gone will this country really move forward as a truly democratic and caring one.
Most other failed political doctrines have petered out as the world trys to move forward like communism for example. However, were the loony left have thankfully gone we are stuck with the reckless right another and one of the last outdated political movements that must be stopped and removed from our society.
It amazes me that the working class can vote for a bunch of archaic public school boys on a whim or because they believe Murdoch’s press!
Wake up UK!

Colin says:
5 March 2016

There should be no need for “switching companies” In my opinion they are an unnecessary add cost!
We have the technology to make comparing costs very simple. Regulations should be in place to make energy companies display this.

Kate says:
5 March 2016

I think what you do James is awesome but they all have their hands in the pot, therefore you have a difficult job on your hands. I wish you all the luck in the world in getting them to listen.

Tim Drakeford says:
5 March 2016

The solution to this is the increasing block tariff for energy, whereby the first x units are supplied at a very low (or even zero) price, with increasing tariffs for greater consumption. This would mean that those whose energy demands are least pay the least, whereas those who consume large amounts of energy pay more.
IBT charging schemes are operative in other jurisdictions, including some states in the USA. UK energy companies should be compelled to introduce them as an option for consumers.

That is not necessarily fair, Tim. People who are at home all day, live in a poorly insulated old house, have large families, or have medical needs or conditions that require higher than average temperatures, might not have the resources or the capacity to change their situation so would be badly penalised under that regime.

Tim, I wonder how many “large users” do so from choice? Do they have their heating on 25C with all the windows open? Do they leave electrical appliances on to waste energy? Most have no choice and would, no doubt, love to be able to reduce their consumption and still stay comfortable. John gives a pertinent example.

We should not subsidise high or low users, only those in genuine need of support.

In the final analysis, I don’t suppose it matters which company you favour (if one can use such a term). Privatisation was supposed to introduce competition and drive down prices. What has happened instead is that the Big Six seem all-too-clearly to have formed a cosy consortium which must meet intermittently to decide how much their price increases are going to be and who’s going to be first with the increase this time round. Also, a company may indicate what its own cheapest tariff is, but it’s hardly likely to tell you if it’s being undercut by a competitor; and schedules of tariffs are in any case too complex to keep pace with. (Question: who’s going to want to be on anything other than the cheapest tariff, anyway?)

We’re also told that the best way to save money is to change company. Yeah, right! The last twice I’ve changed, the companies messed up between themselves such that on one occasion I found myself paying two different companies at once for the same winter bill (that was when I did my own checking after being doorstepped – now illegal, I think – and changed my mind); and on the other, my transfer simply didn’t go through.

Finally, prices have plummeted over recent months and years; to offer a paltry 5% reduction now is to insult us all. The CMA must get its act together, it must have teeth, and pressure must be brought on the government to do what it was so damn keen to do – and govern.

Val:

“Also, a company may indicate what its own cheapest tariff is, but it’s hardly likely to tell you if it’s being undercut by a competitor”: – EDF do exactly that on their fixed price “promise” tariffs.

(Question: who’s going to want to be on anything other than the cheapest tariff, anyway?) Answer – most of the market, seemingly. A (mostly silent) majority seem to be unwilling or unable to move suppliers.

You shouldn’t have to keep switching to get the best tariffs.

The elderly, amongst others, find the process confusing and may not always have access to a computer. As always, the onus is on the customer to repeatedly seek out and understand what can often be teaser or misleading contracts whilst the multinational suppliers continue to maximise their profits at the expense of their customers.

Having changed suppliers repeatedly for years it really makes little difference after the first switch. They are all much of a muchness. I am changing again , less than a year since last change and notice that to get a cheaper deal am having to sign up to longer contracts and pay an exit fee, The power companies have it their way every time and that also goes for the smaller companies and the ‘special’ deals which are not so special….

The only way to get a fair energy market is either to renationalize the entire industry or insist that government holds a “golden share” of companies operating in the UK energy market ensuring proper control and protection for the consumer.

Peter Rogers says:
5 March 2016

Why should we have to keep going through the hassle of switching suppliers? Gas is gas. Electricity is electricity. Back in the days of nationalisation, there was one supplier, not countless different suppliers each offering countless different contracts, which are nothing more than a con to keep us confused and get away with charging more than we need to pay. It’s the system that’s wrong and tinkering with it won’t change a thing.

The experiment has failed. The Private energy companies and utility companies and the rail service have shown that they all need to be brought into public ownership. This would mean not only the public would get a better and cheaper service , but business as well. The Energy companies do not invest in new power plants but expects the tax payer to build them for them. I doubt if a small business would be able to do this. The Energy companies import coal from around the world while we sit on 350 years of reserves.

Robin says:
5 March 2016

What about the escalating standing charges these suppliers charge

I recognise the need for innovation and the value of competition, but I am not happy with energy companies making high profits when so many people are struggling to make ends meet. I feel the same about other essential services and goods.

Here is a recent article in the Telegraph, which claims that the ‘Big Six energy companies’ profits increased tenfold since 2007′. Regarding what this costs consumers: ‘That equates to average profits of just £2.31 per fuel, per household in 2007, rising to £23.71 per fuel, per household in 2013.’: http://www.telegraph.co.uk/news/earth/energy/11475989/Big-Six-energy-companies-profits-increased-tenfold-since-2007.html On the face of it, this does not seem excessive, but I would like to know how much the companies spend on advertising and paying their senior staff.

The Ofgem websites shows that companies have good and bad years and obviously companies have to be able to pay their staff and carry on with essential work in lean years: https://www.ofgem.gov.uk/gas/retail-market/monitoring-data-and-statistics/understanding-profits-large-energy-suppliers

When I see my bills coming in and I stare at and try to work the bills out. These bills might as well be written in Chinese for all the sense they make. They are designed to baffle us. The big six can get away with their price hikes because there is not an organisation fit enough to challenge them. Those who purport to represent the consumer are paid no doubt by the big six to ignore their high energy prices and continue to rip us off.

The chancellor focus on benefit bashing (apply the rules laid down by legislation is correct) instead of revenue collection re:Amazon, Facebook, Google, KFC, HSBC, LIBOR, FOREX without any “missing” billions revenue recovered shows exposes the out of focus G Osborne. Not 1 banker charged, prosecuted, jailed or any money recovered. Benefit fraudsters, are fined, jailed as are the UK drug barons/dealers with asset stripping automatic. ? The energy Regulators are multi-national millionaires financial puppets following the unpunished financial scandals of recent years. An elected independent Regulator (by independent electors) is the only answer.