Gas and electricity Updated:
The Competition and Markets Authority (CMA) has released a final report on its gas and electricity market investigation, and while it found that many aspects of the market were working well, it has also found some areas that need improvement.
Things that are working well…
The initial investigation ('Modernising the energy market') was triggered by the rapid increase in retail energy prices that took place over the decade stretching from 2004 to 2014. During this period, there were concerns that price levels were not necessarily reflecting true costs and were instead generating excessive profit for energy suppliers. However, the good news is that this investigation has found no evidence that companies in the wholesale market are exploiting market power for their own gain.
In other good news, the report found that new suppliers have seen a sustained period of growth over the last few years, which can only be a good thing for customers. Indeed, the combined market share of these newbies has now reached 13% in both gas and electricity - the highest level since the markets were liberalised.
…and things that need improvement
So much for the good things, but what about the issues uncovered by the investigation?
Well, one of the crucial (but perhaps not unexpected) findings was that a lack of engagement on the part of consumers is contributing to high prices. According to a survey carried out for the report, 34% of respondents said that they had never considered switching supplier, while another 56% said that they had never switched, did not know it was possible or did not know if they had switched in the past. As a result, the suppliers are raising prices without fear that their customers will desert them.
Consumers even fail to be motivated to switch tariffs with the same supplier: 70% of the big six energy firms are currently on the default tariff (the Standard Variable Tariff), which happens to also be the most expensive. Such an absence of motivation can take a toll on household budgets and reduce the opportunity to save: indeed, the CMA calculates that if dual fuel customers on the Standard Variable Tariff switched to another supplier in mid-2015, they could have saved around £330 per year.
But why are people so reluctant to switch? Well, the report concludes that it is primarily due to the idea not occurring to consumers due to a lack of information, or because they think it will be too much hassle - this is the attitude that the CMA wants to change.
Change on the cards
In order to tackle the competition issues in the gas and electricity market, the CMA is proposing to create a new regulatory framework for effective competition. It also plans to remove or reduce technical constraints that limit the market to the detriment of consumers. It is hoped that these improvements will boost the market and help consumers to see that switching providers would be worthwhile. A cap on the prices offered to prepayment customers over a transitional period has also been proposed.
"Our remedies package will revitalise the energy market, intensifying competition between energy companies to bear down on costs, ensuring customers can make informed decisions about the range of options open to them and encouraging the development of smarter regulations that work in consumers' interests," said the report. These proposals certainly contain good news for consumers, but you don't have to wait for them to be implemented to get a good deal on your energy supply.
You don't have to wait to switch
Searching the market and switching tariffs or providers could save you a tidy sum of cash, so why not see if you can trim your bills down to size today? Check out our gas and electricity comparison tool and see how much you could save.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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