March 10, 2016
The Competition and Market Authority (CMA) have today released a report outlining remedies to address the problems holding back competition in the energy industry. The CMA will introduce these solutions following the conclusion of its investigation in June.
Does the energy market need to be more competitive?
Despite the increase in independent energy suppliers, providing competitively priced energy tariffs, 88% of UK households remain with the "Big Six" Energy suppliers; British Gas, EDF, E.ON, Npower, Scottish Power and SSE.
Around 70% of those customers are STILL on the more expensive 'default' Standard Variable Tariff and the CMA's latest analysis reveals that the potential savings for these customers has risen significantly over the past 2 years - with the average customer making a potential saving of over £300 by switching to a cheaper deal!
The CMA's analysis also shows that, in total, customers could have been paying about £1.7 billion a year more than they would in a competitive market.
The CMA have proposed different remedies it believes will make the energy market more competitive. These include:
OFGEM Controlled Database of Disengaged Customers
The CMA believe that the only consumers benefiting from competitive price plans are those that actively compare energy tariffs and switch supplier. As a result the CMA have suggested an OFGEM-controlled database which will allow rival suppliers to contact customers who have been stuck on their supplier's default tariff for 3 years or more with more competitive deals. This will be subject to strict safeguards so that customers can opt out at any time and to ensure that communication meets strictly controlled criteria.
This will be interesting to see in action and how it will actually work. It will hopefully benefit those customers who have never considered the financial benefits of switching energy supplier.
Goodbye Four Tariff Rule
Previously Energy Suppliers could have as many tariffs as they choose, then OFGEM decided that each supplier should be limited to four. To encourage competition, the CMA have said today the four tariff cap has been lifted.
Energylinx is delighted that after two years of investigation, that the CMA has decided to ditch the current rules where energy suppliers can only offer four tariffs. We believe that by allowing innovation in terms of number of tariffs and structures actually increases competition and TPIs remain well placed to provide the consumer with a one stop shop to compare and switch - taking advantage of the best energy tariffs for their home.
Price Cap for Prepayment Customers
Vulnerable customers will be protected from expensive tariffs under a new price cap on prepayment meter tariffs. Part of CMA's plans include a transitional price control for the 4 million households who are on prepayment meters and that face limited competition from suppliers. Prepayment customer's ability to switch and find better deals is also far more limited than that for credit and direct debit customers.
Energylinx is pleased to see that vulnerable customers are being provided with added protection with a new price cap arrangement planned for prepayment customers, as we are active supporters of the Citizens Advice "Fair Play to Prepay" Campaign.
The energy industry was referred to the CMA, by OFGEM, in June 2014. The final report is due in June 2016.
Over the course of the investigation to date, the CMA has commissioned and completed a general survey of 7,000 domestic customers; a further survey of over 1,200 domestic tenants and received over 200 submissions from energy suppliers, generators, government bodies, consumer groups, academics and other interested parties; held over 40 formal hearings with these parties; visited power plants and customer service offices in Scotland, England and Wales.
Posted on March 10, 2016 at 10:38 AM