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Cameron intervenes over competition in energy market

Posted on 19 October 2012

Energy companies will be forced to offer customers the cheapest tariffs, said David Cameron in Parliament yesterday.

"I can announce that we will be legislating so that energy companies
have to give the lowest tariff to their customers," Cameron told MPs
during his weekly question and answer session.

The legislation, he hinted, would accompany work being conducted in
the area by regulator Ofgem, but his announcement surprised other
officials, including at the Department of Energy and Climate Change.

DECC later issued a statement saying that companies would not be
forced to put all customers on the cheapest tariff, indicating that
there was some confusion within the Government over what the policy
would be. A statement from DECC is expected later today to provide
further clarification.

The DECC official added: “our view is that not enough people are switching at the moment, only a minority".

At present only 15% of British households switch supplier in search
of better rates, and there can be a difference of as much as 50% between
the highest rate offered and the lowest.

In other words, one person can be paying twice what their next-door neighbour is paying for the same service.

The shadow energy secretary, Caroline Flint, accused the government
of putting its energy policy “in total disarray". She said: "The prime
minister is making it up as he goes along".

Ann Robinson, director of consumer policy at the energy-switching
site Uswitch.com, said that the move, if it happened, would do little to
promote competition within the energy industry and break the monopoly
held by the Big Six energy companies, because together they would agree a
lowest price.

But she did say there was scope for the energy industry to copy the
insurance industry and force people to renew their account every year,
which would provide them with an incentive to shop around.

Stephen Fitzpatrick of independent supplier Ovo Energy, on the other
hand, argued that it would provide an opportunity. "One year ago energy
companies, government representatives and other interested parties
agreed that they would take action to bring down prices, but little has
happened," Fitzpatrick said. “It is something that you can regulate."

He continued: "Loss leading offers by energy companies make it
difficult for new entrants to compete. However, if the Big Six energy
companies together agree a basic low price, it does create an opening
for us to undercut them and provide more attractive offers." He said we
will see “a huge surge of competition from independent energy
companies".

Ofgem, the energy regulator, will publish on Friday new guidelines
for the industry, after its review blamed the complexity of tariffs and
lack of transparency for the lack of take-up by customers of low
tariffs.

 

Souce: link2portal