Now is the time for the government to intervene on energy prices and override the Big Six firms
This winter it is imperative that something is done to fix our broken energy market.
Seven out of 10 households are still on the highest priced deals, paying some £300 more than they should – and too many of these are the most vulnerable in our society.
The Competition and Markets Authority investigation report, published in June, was a damp squib and will do little to help these consumers who can’t or don’t engage in the energy market. At a recent industry event featuring representatives from across the energy sector, only 11 per cent of those present felt that the CMA’s recommendations would help these households that are significantly overpaying.
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When even the industry itself thinks the CMA missed the target, it’s cause for concern.
There is little in the CMA report that is going to force the Big Six energy firms to drastically change behaviours, and they certainly aren’t going to change on their own accord. To put it simply, more needs to be done and the government needs to step in if we want an energy market that works for everyone.
Solution 1: Telling sticky customers if better energy deals are available
As a first port of call, we propose the Big Six should be forced to tell their sticky customers on a regular basis if better energy deals are available.
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Ofgem rules already require suppliers to inform customers if they could be on a cheaper tariff every time they are billed. But the Big Six circumvent this, for example by billing only a few times a year.
Suppliers should be required to send a monthly letter, email or text message to their customers, alerting them to the best deals on offer and showing the savings that can be achieved.
Solution 2: Legislation to ensure the Big Six automatically put customers first
The Standard Variable Tariff (SVT) is the effective default tariff, on which sit some 70 per cent of Big Six customers. It is time to re-set the default for everyone.
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The government should legislate to ensure the Big Six automatically put their most disengaged customers – those who have been on the SVT for more than 3 years for instance – on the best possible deals. This would not only save consumers money immediately, it would transform the market as knowing disengaged customers were no longer “inert” would stop the Big Six over-charging them and drive down prices at this critical end of the market.
And as a priority, the government should focus initially on moving over the consumers who need the savings the most: the 2.2m customers receiving £140 Warm Home Discount or the 4m or so customers eligible for Cold Weather Payments.
It is madness that the taxpayer is subsidising vulnerable people to sit on poor value tariffs.