CMA report dismally fails energy consumers

The long awaited report by the Competition and Markets Authority (CMA) into the market dominance of the Big 6 energy companies, turned out to be the damp squid most in the industry thought it would be.

They found that households paid £8.5bn too much for their power between 2009 and 2013, but blamed customers because they do not switch supplier enough. They claim millions of householders could each save up to £160 a year by switching to a new breed of lower-cost provider.

The CMA resisted calls for a breakup of the Big Six energy companies and instead recommended a price cap on high-cost tariffs and a price comparison website set up and run by the energy regulator, Ofgem.

Roger Witcomb, a CMA non-executive and chairman of the energy market investigation, declined to criticise the big six – British Gas, RWE Npower, SSE, EDF, Scottish Power and E.On – and insisted they had just “behaved in a very commercial way”. Instead he attacked a series of initiatives by Ofgem and the Department of Energy and Climate Change, which he argued had failed to bring benefits to consumers.

Richard Lloyd, executive director of consumer group Which?, said: “This is a damning indictment of how the energy market is failing consumers, with the biggest suppliers taking advantage of millions of households who have also been hit with the costs of government energy policy.”

Others argued for a more radical approach. Fuel Poverty Action campaign group spokeswoman Laura Hill criticised the CMA for “a piecemeal approach to reform,” adding: “They believe confusing and inaccessible ‘competition’ that we have had for nearly 20 years will eventually prevail and reduce bills, which — as we have seen — is definitely not going to happen. Essentially, the only thing that will deliver lower bills is having a completely new energy system which is public, renewable, democratic and owned by the people instead of being driven the Big Six.”

David Harvey identifies many of the reasons consumers don't switch. They have been bewildered by complicated pricing and paralysed by the belief that changing supplier involves too much hassle and carries the risk of ending up worse off in the long run. The elderly and those without Internet access are particularly vulnerable.

He argues that even consumers with the same energy usage can be different because of where they are and when they use electricity. He concludes that data from smart meters, combined with greater trust in the information provided by comparison websites, will be key to consumers becoming more engaged in understanding their own energy usage and encouraging them to switch suppliers on a regular basis.

The Big Six will have breathed a big sigh of relief over the CMA report. It is also the case that customer service, including the use of overseas call centres, is often poor in low price new entrants. This explains why unions have not supported the break up of the Big Six.

However, the CMA report is a toothless waste of paper that simply churns out the same old competition ideology that has dismally failed the consumer. More radical solutions are needed.

 

 

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