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Time to Fix the Big Six and the broken energy market

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Our energy market is broken. We don’t know if the price we pay for our energy is fair, trust in energy companies is at a disastrously low level and bills are rising sharply every year. It’s about time we fixed things.

Energy companies received more than 5.5 million complaints in 2013. That’s more than 15,000 complaints every single day, on everything from bills to switching.

That’s why today we’re demanding six fixes for the energy market with our new Fix the Big Six campaign:

  • FIX NO.1. Increase competition
  • FIX NO.2. Transparent trading
  • FIX NO.3. People power
  • FIX NO.4. Cost control
  • FIX NO.5. Customer trust
  • FIX NO.6. Warmer homes

Ultimately, we think the Competition and Markets Authority needs to conduct a full scale competition inquiry to really get to the heart of the matter.

We don’t think the energy companies should be able to buy and sell energy to themselves, behind closed doors, without any of the light that a functioning market would shed on them. More energy should be traded on open, transparent markets where everyone can see what the actual prices are.

Low trust in energy companies

Aside from wholesale energy costs, more can be done to cut unnecessary costs on your bills that come from government levies. The £50 off energy bills announced following our ‘Cut them down, George’ campaign was a step in the right direction – but only that, a step. The government should look again at carbon taxes, the smart meter roll-out and more – value for money for customers must be the overriding concern.

We want to see a change in culture. Our satisfaction survey, published last month, shows that the Big Six aren’t delivering for their customers. Despite accounting for 98% of the market, none of them ranked above ninth place our survey.

Plus, just one in five trust their provider – that has to change. Concerns recently raised about charging for non-Direct Debit payments, and about companies holding on to hundreds of pounds of customers’ money, just add further weight to this argument. The companies should also be doing more to help you find a better deal with simpler pricing and swifter switching.

A better deal from the Big Six

Finally, we want to see the Government commit to an overhaul of the flagging Green Deal policy. A year after it launched there’s still little understanding of why consumer interest is so low – the Government must review why this is and set out recommendations to improve the product. For example, we want to see companies prevented from charging large fees if a customer wants to pay the balance of their Green Deal loan early.

We need your help to show that this market is broken and we want it fixed. The ongoing regulators’ examination of the energy market is an opportunity for radical action and real change for the benefit of you and me. Have you been dealt a poor hand by your energy company in the past? Tell us about it – and if you want a better deal in the future, sign our Fix the Big Six petition.

Comments
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Debbie says:
14 February 2014

I work in Green Deal and I can assure you that consumer interest in Green Deal is not low, but the majority of enquiries unfortunately do not lead anywhere due to the complexity of the scheme.

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Josh Green says:
14 February 2014

Hi Debbie

We have long been concerned about the complexity of the Green Deal so I’m not surprised that’s your experience. Ultimately it is a complicated financial product, and the actual process of getting Green Deal measures installed can be very time consuming. On the flip side however, because it could tie people in to a long term agreement, its important that appropriate consumer protections are in place to stop people from being mis-sold inappropriately costly measures, or measures that will not deliver the level of savings quoted.

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malcolm r says:
14 February 2014

Josh, please produce some facts and numbers rather than an emotive introduction. Of course we all want lower bills, and of course we all want to be dealt with fairly. But we want information upon which a rational discussion can be based. We have, at the last count I believe, one of the lowest gas costs in Europe, and are in the middle for electricity. Please don’t join in the government’s populist approach but find out facts. Then we can see how best to put pressure on the suppliers to get the fairest deals. Incidentally, the smaller companies outside the “big six” often charge more for energy – are you letting them off the hook?

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Josh Green says:
14 February 2014

Hi Malcolm

Thanks for your comment. We’re calling for a full competition inquiry into the functioning of the energy market in order that we can establish some of the facts that you refer to. So much trading in the energy market is done behind closed doors, facts can be hard to come by but we hope that will change.

We’re not letting any suppliers off the hook, but the Big Six control well over 90% of the market. That said, all energy companies have a role to play in improving this market for the consumer and rest assured we’re not giving the smaller suppliers a pass here.

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J.P. says:
27 February 2014

One of the first steps should be to remove any exit fees as these are an easy way of stopping people swamping energy companies when a competitor is cheaper. So it negates much of the competition.

Another is to insist the pence per unit be displayed along with the average user stats which do not really help most people.

In stead of stopping the No Standing Charge tariffs the standing charge should be abolished. We are paying for the smart meters. Standing charges become significant to the low green user so reducing the incentive to lower consumption.

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malcolm r says:
14 February 2014

To put some numbers into this conversation from one source – just for discussion.
A typical dual fuel energy bill of £1128 for 2015 is broken down into:
1. Supplier costs + commodity and production cost – gas and electricity – £669
2. Govt. energy policy and regulatory costs + energy transportation costs – £459.
So, on the basis of these figures, the costs under control of the energy company are 59% of the total. Not wholly true, of course, because they don’t have control over world energy prices, so their direct costs are 19% of the bill.

These costs can be broken down:
Supplier costs = operating cost £152 + smart meters £13 + profit £53
Commodity cost = electricity £158 + gas £293
Govt regulatory etc = Tax £54 + carbon tax £42 + supporting low carbon technologies £47 + improving customer energy efficiency £38
Energy transportation = use of distribution network £96 + use of national grid £25 + use of gas network £161 + gas storage £5 + balancing and other £8.

It is not a simple topic, and there are many components that are controlled by organisations other than the energy supplier. It all needs careful examination, including the commodity costs and where profits lie there.

So all I am asking is that rather than whipping up emotions we at least examine what facts there are, and probe into those that are not so easy to find.

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Beryl says:
14 February 2014

Surely the whole purpose behind the campaign Malcolm is to determine these facts. They can only be obtained through transparency which has eluded consumers so far. The only way to do this is through people power. We have to start somewhere. Making comparisons with other countries is counter productive unless you are aware of the whole picture. WE ARE BRITISH. If other countries are content to roll over and play dead that is their prerogative.
The key issue here is determining the energy costs between generation and supply, only then will public trust in the Energy Co’s be restored resulting in a better deal for everyone and competition re established in a broken market.

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malcolm r says:
14 February 2014

Beryl, you are right – so I have provided what may be facts and I hope others will add to them or contradict them. I wish that Which? had provided some numbers to show just how costs arise in the energy market. The point I made about energy costs within Europe is simply factual – that many others are paying more than us. We have to separate inevitable costs from the add-ons. Raw energy – gas and electricity – has a cost and I’d like to know what it is bought for by the energy companies. I’d also like to know just how much they make when they produce their own electricity. Who will tell us? The key issue is determining ALL the costs – from energy source to home – so we can see where the scope is for saving.

Incidentally, we spend far more on: food from supermarkets – should we be tackling them? On housing – who do we tackle on fair rents? On commuting – are we looking at transparency there?

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Josh Green says:
14 February 2014

Hi Malcolm & Beryl

The facts that you set out above were also set out in the report we published into the wholesale energy market in July last year (although not using precisely the same categories or indeed identical figures). You are quite ri