10th Mar 2016 08:45
LONDON (Alliance News) - The Competition & Markets Authority on Thursday outlined its proposals for how the UK energy market should be reformed to address the problems hindering competition, following a lengthy investigation.
The investigation started in June 2014 and has looked right across the supply and acquisition of energy in the market. The CMA will now hold a consultation with energy suppliers on its proposals. They include a range of measures aimed directly at customers to help to encourage a greater number to benefit from switching to more competitively priced deals.
The CMA highlighted the argument that customers are paying over the odds for their energy, stating UK households are paying GBP1.70 billion a year more than what they would pay in a "competitive environment".
The anti-trust regulator has proposed establishing a database that would allow rival suppliers to contact domestic and microbusiness customers that have been on their current supplier's tariff for more than three years to try to increase switching levels and competition.
The database would be operated by the market regulator Ofgem.
The CMA also wants to introduce a transitional price control for the 4.0 million UK households that use prepayment meters, which the CMA said face limited competition from suppliers compared to other customers paying by debit or credit cards.
The CMA said the cheapest deals available to those prepayment customers are around GBP300 per year more expensive than deals offered to other types of customers.
"That's why we're proposing a transitional price control for them which will remain in place until 2020, by which time they too will be able to benefit from our measures, and from other future developments like the rollout of smart meters," it said.
The CMA also wants to boost incentives for third party intermediaries, including price comparison sites, which may be welcome news for London-listed firms that operate comparison sites, including Zoopla Property Group PLC, Esure Group PLC and Moneysupermarket.com Group PLC.
Other proposals include making information and bills substantially more transparent than they are now, implementing measures to improve the accuracy of energy consumption and "strengthening" the power of Ofgem.
"The fact that energy and climate policies are expected to make up 37% of the household cost of electricity by 2020 shows the impact that policy and regulatory decisions can have on bills. The evident importance of these and other decisions affecting the future of the energy sector demands clarity and transparency - and a policy making and regulatory structure which is fit for this purpose," said the organisation.
The CMA said the Big Six energy suppliers have been taking the majority of their customers "for granted" in terms of prices, service and quality, with an average of 70% of those customers on standard variable tariffs.
"Clearing the way for competing suppliers, and price comparison websites, to alert customers to the savings they can make will shake up the industry," it said.
The Big Six comprise of British Gas, which is owned by Centrica PLC, SSE PLC, ScottishPower, E.On, EDF Energy and nPower. There are now around 24 independent suppliers in the UK, including London-listed Good Energy PLC.
Many of the larger energy firms, including nPower and E.On earlier this week, have said they suffered in 2015 from increased competition as switching levels rose and independent suppliers gained market share.
SSE was the only London-listed firm to respond early Thursday, stating it will submit comprehensive responses to the proposals in the coming weeks.
"Since a market investigation was first proposed in March 2014, SSE has argued that energy markets in Great Britain are generally well-functioning and competitive; while recognising the benefits of reforms that are in the interests of customers. SSE is still assessing the details of the publication and will continue to engage with the CMA investigation to help build a lasting settlement for the benefit of customers," the company said in a statement.
SSE shares were down 0.3% on Thursday morning whilst Centrica shares were up 1.9%.
Zoopla shares were down 0.3%, Moneysupermarket shares were down 0.7%, and Esure shares were trading down 0.3%.
By Joshua Warner; [email protected]; @JoshAlliance
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