Fine the energy firms: Privatisation has led to confusion in the market, and the Big Six providers have taken advantage


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The energy market is rigged in favour of the established Big Six firms, which have consistently ignored calls from politicians and consumer groups to play fair with customers. They have set their own prices – overcharging us by around 5 per cent, according to a damning report published by the Competition and Markets Authority (CMA). Small businesses come off even worse, paying 14 per cent over the odds for their gas and electricity.

How have they got away with it for so long? How did they manage to rip us off for almost £2bn between 2009 and 2013, as the CMA suggests? It is a question that the former Labour leader, Ed Miliband, may reflect on now. If he had been elected Prime Minister in May, one of his first intentions was to tackle the out-of-control gas and electricity suppliers by imposing a cap on their charges.

He didn’t get the chance, and now the big firms are likely to continue to boost their ever-growing profits while millions in fuel poverty struggle to heat their homes.

Over the years buying gas and electricity has moved from paying a fair price to a responsible state-owned monopoly, to being charged an unfair price by a near-monopoly of six. There may be good reasons that, when one of the big suppliers raises prices, the others quickly follow. Nevertheless, from the outside it smacks of an unfair cartel.

Paying for energy is no longer simple. Anyone who remained loyal to the biggest supplier, British Gas, after the company was privatised in 1986, and who stuck to its standard tariff, will by now have paid thousands of pounds more than they needed to for their heating and lighting.

Millions of customers have quietly carried on paying through the nose for needlessly expensive energy, while a handful of more savvy consumers have switched to another firm, or even a cheaper tariff with their existing energy supplier.

The great clarion call of privatisation – that it leads to better service, driven by more competition – has been proved wrong yet again. Energy companies are consistently listed among the most complained-about businesses in Britain and are named and shamed for having the worst customer service.

And while privatisation did lead to more competition in terms of more tariffs, that in turn led to more confusion and more people ending up on the wrong price plan. Criminally, it led to the big suppliers using every sales trick they knew to persuade people to take up attractive headline offers that quickly became shamefully expensive, unattractive deals, often with consumer-unfriendly lock-in clauses.

Even internet comparison sites, which have helped us all to become more aware about the importance of shopping around to save money, have become part of the problem. They don’t tell us how much they make from passing on our details to suppliers, but have been caught pushing unsuspecting consumers into more expensive deals simply because the sites can make more commission by doing so.

Energy is a broken market. Until consumers know exactly how much they should be paying, they will lose out. The simple solution? Fine firms if they don’t ensure that customers are on the tariff that best suits them. Make them work for customers, not for their shareholders.