“Consumers hold the key to a more competitive market”

British households are rightly concerned about rising energy prices, but they show a remarkable reluctance to search for a better deal and switch providers.
Energy switching by consumers is in decline and currently stands at just 14 per cent of households. Most do not even ask their current energy supplier if they are on the best tariff.
With such a low propensity to switch, it is unsurprising that the dominant strategy for the big six energy companies is to stay in line and react to each other’s price increases. The size of the market up for grabs through the aggressive targeting of new customers is simply too small. More could be done to make comparing energy prices and switching easier. However, the biggest barriers are the perception that switching is difficult and the lack of consumer enthusiasm for energy price comparison.
So rather than announcing future interventions in the energy market, which could prove damaging in the long run and may raise prices in the immediate future, it is more sensible for politicians to focus on facilitating greater competition. Switching must be made easier and consumers need to understand that they hold the key to a more competitive market. They should also encourage suppliers to target each other’s customers more and incentivise the introduction of more efficient electrical and gas products.

Dr Andreas Stephan,
professor of competition law,
University of East Anglia
This is an extract from a blog on http://competitionpolicy.wordpress.com/