Customers, Policy & regulation

Government must close the gap between consumer detriment uncovered by the CMA, and it remedies

Government must introduce an energy price cap “sooner rather than later” Citizens Advice’s director of energy Victoria MacGregor has urged.

Her comments come amid rumours that prime minister Theresa May is under pressure from some Tory colleagues to drop the manifesto commitment. They also follow news that the Queen’s speech, in which government will set out its legislative ambitions for the Parliament, has been delayed.

Writing in a blog post, MacGregor said it is “clear” to Citizens Advice “that the government does need to introduce some form of cap – and sooner rather than later. The longer the delay the more money is lost by consumers”.

She urged government to move on from “stark” debate over whether or not to introduce price regulation at all, and adopt a more nuanced outlook.

“The government can use a targeted approach to cap costs for the most struggling households without having to cap costs for all SVT [standard variable tariff] customers,” said MacGregor.

In its final report following a two-year investigation into energy market failure, the Competition and Markets Authority (CMA) found that around 19 million UK households are on SVTs. The CMA also controversially claimed that market dysfunctions cost UK consumers an average £1.4bn a year.

Industry leaders have disputed the figure, saying it is not based on robust analysis. But in her blog, MacGregor wrote: “Our own analysis of tariff data in March backs this up – finding that these consumers are losing an average of £140 a year.”

MacGregor expressed her support for the CMA’s intervention to cap energy prices for customers on prepayment meters but said the move “offered little for the loyal credit customers who are on standard variable tariffs”.

She also reiterated Citizens Advice’s belief that the limited intervention exposed a gap between “the enormous costs to consumers uncovered by the CMA and the remedies that have been offered to recoup them”.

According to Citizens Advice as many as 4.7 million households in England haven’t switched their energy supplier for 10 years.

Those on low incomes, as well as the elderly and disabled are least likely to have taken advantage of market offers. Meanwhile, those who do switch supplier tend to be better off – 7 in 10 of the highest earners are on the cheapest deals the consumer body has claimed.

Setting out recommendations for how to move forward with a targeted price cap for vulnerable customers, MacGregor said a “safeguard” tariff for certain groups could be effective.

Around 800,000 of the poorest pensioners and 1.5m low income families with children in Great Britain are on their supplier’s standard variable tariff,” she wrote. “These households are paying more for the same gas and electricity but can least afford to do so.”

Citizens Advice has called several times for the prepayment price cap to be extended to all those eligible for Warm Home Discount. MacGregor clarified that this includes “low income households with an elderly person, a young child or someone with a long term health condition”.

MacGregor concluded that a cap for the worst off would still allow for competition to thrive in other parts of the market, but warned that the level at which a cap was set would be critical in determining its effectiveness.

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