A real energy shake up?

August 3, 2016

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It feels like a long time since the Competitions and Market’s Authority (CMA) undertook its investigation into competition in the energy sector – two years in fact. In that time 18 more energy companies have joined the industry, however it is still dominated by the ‘Big 6’ energy companies. They account for 83% of all consumers in the UK and their stranglehold on the market and people’s cash is well documented.

Today Ofgem responded to the CMA’s report with some suggested reforms set to increase competition and shock the market into providing more competition for consumers. Some of the takeaways from Ofgem:

  • An interim price cap on customers using pre-payment meters which will save around £75 a year beginning next April and running until 2020
  • More prompting of customers who have remained on expensive tariffs for more than 3 years
  • Ofgem allowing access to customer data and usage to allow them to be approached by energy companies to switch (intended to be by post)
  • Continuation of the ‘Be An Energy Shopper’ campaign

The Sustainable Homes view: what this means

The CMA report has been heavily criticised. Described as a ‘whitewash’ for not going far enough in recommending reform to the UK energy market. The Ofgem response at least goes some way to implementing the recommendations that were suggested and the cap on prepay (albeit only from next year) is welcome for those who are vulnerable. However, the controversial move to allow access to customer data presents both privacy and trust issues.

The intention to ‘prompt’ those who are the hardest to reach sends a mixed picture – if you haven’t switched in 3 years will a letter prompt you to do so? Ofgem states they will be trialling various communication methods, but the onus is still very much on the consumer to switch and find the best deal – something which the more savvy customers already take advantage of.

True consumer protection and energy reform for domestic customers is very much at the foothills. The changes re-enforce what we already know – that switching is the easiest way to save money, but it is still perceived as too difficult. It is even more difficult for those who are vulnerable, on pre-pay or who have a poor credit rating meaning they are stuck in the cycle of expensive tariffs and increasing debt. Ofgem’s response is welcome, but there is still a lot to do.

 

Bevan Jones

Bevan Jones