Energylinx News

August 4, 2016

OFGEM's Energy Shake Up - is it Enough?

OFGEM LogoOn the back of the two-year CMA investigation in to the gas and electricity market, OFGEM has announced new plans designed to increase competitiveness and make the energy market fairer for all.

According to the CMA's investigation, two thirds of households are paying over the odds for their energy compared to those who have switched suppliers. It warned that as much as 70% of customers were on the more expensive "default" standard variable tariff.

The investigation ended in June and Energylinx think it's great to see OFGEM quickly taking forward the CMAs recommendations to increase competition and reach people who aren't engaged in the market.

The Changes

By introducing a cap on prepayment meters, the first of OFGEMs changes should save four million UK households around £75 a year. This will begin in April and will end in 2020.

In an attempt to engage customers who don't regularly compare and switch their energy tariff, the regulator will also be trialling more effective prompts to encourage customers to switch.

Proposals include working with suppliers to help "disengaged" customers shop around. As part of this OFGEM has revealed plans to pilot a database service in 2017, which will allow rival suppliers to offer those customers on standard variable rates for three years, better value deals.

OFGEM has plans to roll out smart meters to every household in the UK by 2020, and to make switching suppliers faster and easier and drive down energy bills.

Is it enough?

Whilst any shake-up of the energy industry is welcomed, many have questioned whether this is enough to encourage customers who just aren't bothered about switching their gas or electricity supplier.

Consumers are frequently told of the benefits of switching energy supplier. They hear it from the government, consumer groups, energy suppliers, and energy comparison websites. Yet, for the majority this falls on deaf ears.

"The Disengaged" as CMA refers to them, tend to be on low incomes, have few qualifications, are tenants or are aged over 65. So, pensioners all around the country and those struggling to make ends meet, aren't engaging with the industry. They aren't doing the one simple thing that could have a massive impact on their energy bills and the latest OFGEM report has been criticised for "not going far enough" for them.

Ed Kamm, managing director of First Utility, told the BBC that one problem with the proposals was that they were 'helping those who already shop around and doing little to properly help those who are continuing to pay much more than they need to or should'.

Whilst Which? Welcomed OFGEMs report, they acknowledged the difficulty in establishing the proposals.
Alex Neill, Which? Director of Policy and Campaigns, said:

"After two years of investigation into the energy market it's now time for action, so it's good to see OFGEM swiftly taking forward the CMAs recommendations to increase competition and reach people who are not engaged in the market.

The regulator faces a huge challenge in implementing all of these recommendations in a way that stimulates competition to deliver better outcomes for many more consumers. For this to happen the industry will need to commit to working with the regulator to ensure people get a fairer deal on their energy."

Energy UK agrees that customers need to be at the heart of what the industry does. In a statement, it said:

"Over two million customers have switched (energy supplier) in 2016 so far. There are now 44 suppliers in the market, offering different tariffs for different needs. Prices are now £200 cheaper than in 2014 with over 40 deals under £900."

Without sounding like a broken record, Energylinx recommend that to benefit from a competitive market, you need to compare energy suppliers. Energylinx offer a free and impartial energy comparison and switching service - you will be amazed at what you can save.

Posted on August 4, 2016 at 10:25 AM