This year I believe we have a real opportunity to make things better for energy consumers. I have been an energy consumer champion for 17 years and, after many years of battling energy companies on mis-selling and a host of other issues, what I do know is that the industry needs to be properly regulated if customers are to get a fair deal. Although I believe in competition – because when it works it can result in fairer prices – we have to face the fact that not everyone can and will engage in the market. What we now have is two markets for energy – one for the regular switchers, who make up about 15% of all households, and another for those who never or rarely switch.
Upping the level of switching will have a big impact and there are simple things that could be done to encourage this, such as an annual statement with an improved annual renewal notice, along the lines of motor insurance. But we need to go further.
At present there are two-thirds of us who don’t switch who are with the big six energy companies on expensive standard variable tariffs (SVT). The reality is the majority of people on these tariffs are unlikely to switch. I would argue those people need extra protection.
For instance, last year the Competition and Markets Authority provided help for people on costly pre-payment meters by capping their tariffs. Why not have some form of price control for the group of people who have been on STVs for, say, more than a year?
At the moment Ofgem, the regulator, cannot cap SVTs. But I am hoping that when the chancellor in his budget speech last week mentioned that he was to give more enforcement powers to consumer groups this was a hint that Ofgem will be given the power to do so.
At the moment there can be almost £200 difference between a company’s cheapest tariff and its SVTs. So a cap could be in absolute terms or, as I would prefer it, related to its cheapest tariffs – no more than 10% higher than a company’s best deal.
We are expecting a green paper this spring on when government or regulators should intervene in markets, but by the time we have gone through consultation and action is taken it will probably be too late for next winter, when increasing numbers will be self-rationing their energy.
