In its June report into the energy market, the Competition and Markets Authority (CMA) found that 70% of domestic customers could save as much as £300 a year by switching to cheaper deals.
In order to help people who have been on a default tariff for more than 3 years – who are currently paying some of the highest prices in the UK for their energy – suppliers will be required to provide Ofgem with relevant information to help these customers (both households and microbusinesses) switch to a better deal.
Ofgem will then make this information available under strict controls to competing energy suppliers so they can offer cheaper deals direct to customers based on their actual energy usage. These offers will only be made in writing and customers will be able to opt out of the scheme whenever they want.
Ofgem is already working with consumer groups and suppliers on developing a small-scale pilot of the service, to start next year, before rolling it out nationally. This will allow them to test how it works for both energy customers and suppliers, as well as resolving any concerns – especially ensuring that communication to these customers is not excessive or confusing.
Further moves to encourage switching have been announced by the government and Ofgem, including the publication of figures to show potential savings for default tariff customers. The CMA welcomes the government’s consultation on giving customers access to data on their energy usage and enabling them to share this securely with price comparison websites if they wish, to help them switch and save – a move which was recommended by the CMA in its June report.
The CMA also found that microbusinesses have been paying around £180 million a year more than they would in a more competitive market - with around 45% stuck on expensive ‘default’ tariffs. At present when some microbusinesses come to the end of an agreement with a supplier, they can be transferred onto more expensive ‘rollover’ contracts. The CMA has ordered that, from next year, suppliers will have to stop using high exit fees to lock microbusinesses into these contracts. Suppliers will also have to publish their prices so that microbusiness customers can get a much better idea of what they should be paying for their energy - and what alternatives they have.
Roger Witcomb, Chairman of the Energy Market Investigation said:
These measures will reach the very customers who have been paying too much for too long. We know there are much cheaper deals out there and this will bring them directly to those customers, to make it as easy as possible for them to switch and save money.
We’re also helping small businesses to see which prices are available to them, and ensuring they can’t be locked into the most expensive contracts.
We’ve now finished putting in place those changes which we’re ordering in this market. Along with the recommendations we’ve made to Ofgem, there are over 30 measures resulting from our report which will help the energy market work better from top to bottom. We believe these changes will see customers benefitting from better deals in a more competitive market.
As well as these measures, the CMA has now published a number of other final orders setting out changes that will result from its June report. These include making suppliers allow the 700,000 households – a large proportion of which are Scottish – on restricted meters (including total heat total control meters or dynamic teleswitching meters) to switch tariffs without their meters being replaced. The CMA found that some customers with these meters could save as much as £150 by switching to a cheaper tariff.
Last week, the CMA finalised its price cap for the 4 million households with prepayment meters. This will help keep costs down for some of the most vulnerable households in Great Britain and is expected to reduce their bills by around £300 million a year.
The orders and all other information published in relation to the investigation are available on the energy market investigation case page. A short overview of the investigation is also available, along with a range of other materials for consumers and businesses explaining the investigation and its findings.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the Competition Commission and the competition and certain consumer functions of the Office of Fair Trading under the Enterprise Act 2002, as amended by the Enterprise and Regulatory Reform Act 2013.
- The members of the Energy Market Investigation Group are: Roger Witcomb (Chairman), Lesley Ainsworth, Martin Cave, Malcolm Nicholson and Robert Spedding. The appointed investigation group act as the decision-makers during the market investigation and remedies implementation phases, and were chosen from the CMA’s panel members, who come from a variety of backgrounds, including economics, law, accountancy and business.
- For more information on the CMA see our homepage or follow us on Twitter @CMAgovuk, Flickr and LinkedIn and like our Facebook page. Sign up to our email alerts to receive updates on markets cases.
- Media enquiries should be directed to Rory Taylor (firstname.lastname@example.org, 020 3738 6798).