The proposed measures announced today (March 10) include a temporary price control for the 4 million customers on pre-payment meters (PPM) until the end of the smart meter rollout in 2020. Another potential remedy is the creation of a database run by Ofgem of disengaged customers who have been on a standard variable tariff (SVT) for more than three years, to allow rival suppliers to compete for them through targeted marketing.
The report also suggests removing the four-tariff rule imposed under the Retail Market Reform and claims that energy customers have been overcharged by £1.7 billion a year – which the industry disputes. Utility Week looks at the industry’s initial reaction to the measures:
Secretary for State for Energy and Climate Change Amber Rudd:
“This is a wakeup call to the big six. Energy customers should get a fair deal from a market that works for them. That’s why we called for the biggest ever investigation into the energy market and won’t hesitate to take forward its recommendations.
“This report goes hand-in-glove with everything this Government is doing to deliver a fair, competitive energy market that puts the families and businesses paying the bills first and the power back in their hands.”
Energy UK chief executive Lawrence Slade said:
“We agree that customers should have the information they need to make an informed choice but would like people to be able to choose if they get marketing information or not. The implementation of this proposals will need to be carefully considered to ensure that customers’ personal data and right to privacy remains protected.”
“The most important thing here and what comes through the report is about how we actually get those customers not engaged in the market, engaged in the market. What I’d like to see happen now is draw a line under the past and see how everyone can work together to get those people engaging in the market. Let’s not worry about the money, let’s just get customers on the best deal.”
Good for the CMA in proposing remedies for broken energy market. Wish somebody had thought of price cap idea earlier…
— Ed Miliband (@Ed_Miliband) March 10, 2016
Citizens Advice chief executive Gillian Guy:
“The UK energy market doesn’t work for all consumers. Prepayment meter customers get a particularly shoddy deal – it is more expensive, inconvenient to top up and consumers are usually excluded from the cheapest energy deals.
“It is good the CMA has acknowledged prepay customers need better protection and a price control is a very positive step for the millions of households who use this payment method and often get a raw deal.
Which? Executive director Richard Lloyd:
“After two years of this energy inquiry, there is still a long way to go before we will have an energy market that works for all consumers. While it is right to ensure that vulnerable customers on pre-paid meters are quickly protected, there are many people struggling with their bills who will not be helped by this price cap.
“With the cost to consumers of an uncompetitive market now standing at £1.7 billion, we want all the energy suppliers to stop resisting change and start working harder to restore trust in their industry.”
Centrica plc chief executive Iain Conn:
“The CMA’s proposed remedies are now subject to consultation. We believe that, provided they are implemented thoughtfully, the majority will benefit our customers. We will work through the full report once we have it and submit a formal response in line with the required timetable.”
Scottish Power chief corporate officer Keith Anderson:
“With half of our customers already on fixed products we embrace moves that help consumers engage more with the market to secure better deals. We will now review the detail to ensure that the remedies give customers more choice and help competition work better within the market.”.
EDF Energy chief executive Vincent de Rivaz:
“We haven’t waited for the inquiry to take action for customers and we have done a great deal to make choice easier and improve the service we provide. We are helping to transform the industry through digital innovations like smart metering and connected home technologies. We believe more can be done on an industry-wide basis to help all customers utilise these technologies and make active choices.”
SSE chief executive Alistair Phillips-Davies:
“Today’s publication by the CMA is a substantial package and SSE will now consider these remedies in detail. We will welcome remedies that benefit customers, work in practice and can be implemented pragmatically in this dynamic and changing retail market which is undergoing significant modernisation.”
After two years of the CMA energy inquiry, there is still a long way to go before we will have an energy market that works for all consumers
— Richard Lloyd (@RichardJLloyd) March 10, 2016
First Utility chief executive Ian McCaig:
“We are delighted to see that the CMA’s proposed remedies focus on disengaged customers with the inclusion of cheapest tariff on the market on bills and a name change for the Standard Variable Tariff – two of the things we’ve championed for consistently.
“It is also promising that the CMA is addressing the most vulnerable with a safeguard tariff for those on prepayment meters – an area of the market that has been largely underserved due to the complexity involved.”
Ecotricity founder Dale Vince:
“It’s a great escape for the Big Six, and it’s a big missed opportunity for the CMA and for Britain. The energy industry has been dysfunctional since it was privatised twenty-five years ago. It’s neither one thing nor another – it’s not regulated, it’s not a free market, it’s just a dog’s dinner. And these proposals from the CMA are just going to add to that.”
“The biggest issue the CMA has ducked here is giving the 70% of people who’ve never switched supplier a fair deal – that could’ve been done with a price control, but the CMA instead wants to put those people on a database so that energy companies can bombard them with marketing material.”
Good Energy founder Juliet Davenport:
“There are some good measures proposed which will mean customers get a better deal. Opening up the customer database and relaxing the four tariff rule could help reluctant customers get better information.
“It’s right that the most vulnerable customers get some protection.”
Ovo Energy chief executive and founder Stephen Fitzpatrick:
“The last two years have been a complete waste of time and taxpayer’s money. Some of the CMA’s nonsensical ideas will actually do more harm than good to customers.
“OVO will continue to put the customer first and today’s announcement won’t affect the way we run our business.”
Utilita Energy managing director Bill Bullen:
“We welcome the recognition by the CMA that more needs to be done to ensure they have access to the quality offers and support they need.
“We are encouraged at the proposed recommendations to remove some of the restrictions on tariffs – it will be essential to make sure all the barriers to independent suppliers innovating for the benefit of prepayment customers are removed.”
Green Energy chief executive Doug Stewart:
“Despite the intent to re-establish trust in the industry, the constant too-ing and frow-ing of CMA consultation suggestions, has possibly led to more mistrust in the energy sector.
“Instead the CMA enquiry has led to a series of tinkering around the edges of the energy sector culminating in the biggest tinker of them all – sharing customer information. Bombarding potential customers with phone calls or direct mail will almost certainly switch them off the idea of changing energy company.”
Extraenergy managing director Ben Jones:
“The big energy suppliers are incapable of offering consistently low prices because they are hooked on expensive, one-size-fits-all billing technology which is not fit for purpose and costs a fortune. No amount of regulation or intervention is going to change that.
“The CMA’s move to open up databases is a welcome step, but much more needs to be done.”
The Institute of Customer Service chief executive Jo Causon:
“By giving rival energy companies the opportunity to directly approach their competitors’ long-term customers to offer better deals, the opportunity to change providers is even greater. We would expect more people to switch incentivising energy companies to focus even more on customer service.”
CBI Business Environment director Rhian Kelly:
“The proposal to lift the cap on deals that providers can offer is good news. It will give consumers more choice and help companies innovate to bring costs down.”
Would prefer eligibility to be based on CWP group not metering system – prepay is a fairly crude measure of vulnerability – but progress.
— William Marchant (@richonlyinname) March 10, 2016
Money Supermarket energy expert Stephen Murray:
“Today’s recommendations from the CMA are a positive step towards helping UK households save more money on their energy bills. Most importantly, removing the four-tariff rule should provide consumers with more choice, clearer differentiation between suppliers and increased switching possibilities.
“In theory, we welcome the plan to open up customer databases, if it helps vulnerable or disengaged customers who stand to save the most money. However, the devil’s in the detail and we need to understand how this will work in practice. It’s important that customers don’t feel hounded, or as if their trust has been compromised.”
TheBigDeal.com co-founder Will Hodson:
“The CMA are naive to propose opening a database of customers to energy companies. The proposal would take exploited customers out of the pan and into the fire of a thousand cynical sales pitches. People need independent advice from organisations they can trust to get the best deal for them.
“The fact that customers who pose the lowest credit risk have been paying the highest prices is a disgrace. This overdue intervention to stop them being overcharged should bring shame on the Big Six.”
Head of the Global Energy Research Network David Elmes:
“A very delicate balance between competition and regulation – hopefully not a fragile one – is how I would describe the Competition & Markets Authority’s proposals for the energy markets released today.
“A price cap for people on pre-payment meters is a return to regulated prices for the group of customers that can include people most at risk of fuel poverty as they struggle to balance fuel costs with their other bills.”
Baringa management consultants’ spokesperson:
“There are significant concerns about how the safeguard tariff cap for prepayment customers will be set – what would it be linked to and how quickly would it move if the wholesale price, for example, moved? Such questions are yet to be fully addressed.
“The four tariff rule, implemented by Ofgem, has proven to be detrimental to customers and is being revoked whilst rules that were supposed to make bills clearer were too complex and are now being rewritten.
“In an extreme scenario, this could result in some UK suppliers exiting the market as they are no longer making sufficient margin for them to be viable businesses in the long term, given their capital intensive nature.”