Competition in energy markets isn't working for 'the majority' of people, watchdog probe finds

Most people simply don't treat utilities like a market

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Competition between household energy suppliers is not working properly for “the majority” of consumers, the Government’s markets watchdog has warned.

The Competition and Markets Authority, set up under the Coalition, has completed a year-long inquiry into energy bills.

The watchdog said that the simple fact that people generally do not ‘shop around’ for basic utilities meant they generally did not benefit from competition in the market.

The CMA also blamed shortcomings in regulation and the confusing way energy is priced.

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It found that tariffs offered by the so-called ‘Big Six’ energy suppliers were around 5 per cent higher than they should be between 2009 and 2013.

Roger Witcomb, chair of the energy market investigation, said energy suppliers have no incentive to improve.

“Whilst competition is delivering benefits to increasing numbers of customers, mainly through the growth of smaller suppliers with cheaper fixed-price deals, the majority of us are still on more expensive default tariffs,” he said.

“Many customers do not shop around to see if there’s a better deal out there – let alone switch. The confusing way energy is measured and billed can make comparing deals understandably daunting.

“The result is that some energy suppliers know they don’t have to work hard to keep these customers. It’s notable that there are such high levels of complaints about customer service.”

Until the 1990s electricity was supplied by the state-owned Central Electricity Generating Board, which was broken up into four companies and privatised.

The CMA recommended accelerating the roll-out of so-called smart meters to “increase engagement” amongst the majority of people who do not care which energy supplier they are on.

It also said it would consider whether a “transitional price cap on the most expensive tariffs” was necessary to protect consumers.

It stopped short of recommending the break-up of the ‘Big Six’ suppliers, however. These firms, British Gas, SSE, EDF Energy, RWE npower, E.ON and Scottish Power, hold the majority of the market.

Responding to the report, Secretary of State for Energy and Climate Change Amber Rudd said:

"Our priority is to keep bills down for hardworking families and businesses across the country. We'll consider the report and respond soon and we won't hesitate to take further action where the market is not delivering a fair deal for consumers – including doing more to support switching, ensure the swift roll-out of smart meters and increase competition in energy markets".

Under its former leader Ed Miliband, the Labour party pledged to freeze energy bills until 2017 if it won the election.

Last month the new Energy Secretary Amber Rudd wrote to the Big Energy suppliers and questioned whether their prices truly reflected their costs.