The energy regulator, Ofgem, has promised to introduce price controls for customers on pre-payment meters next spring – the first since the domestic power sector was privatised more than 15 years ago.
It described the move as a watershed moment. A database allowing rival suppliers to offer better deals to those on standard variable rates will also be introduced.
But opposition MPs, independent providers and others said Ofgem’s initiatives, which follow up recommendations from the Competition and Markets Authority (CMA), were far too little too late.
Ofgem’s chief executive, Dermot Nolan said the shakeup would loosen the grip of the big six suppliers, which control more than 85% of the market.
Nolan said: “The CMA’s final report is a watershed moment for industry and consumers and points the way to a fairer and more competitive future. I call on energy companies and consumer groups to seize this opportunity.”
The price cap will help the “most vulnerable and least likely to switch” and will save them around £75 a year from next April, he added.
The controls will last until at least 2020 when the introduction of smart meters could eradicate overcharging in that part of the market. The CMA investigated the wider energy market after an outcry over soaring power bills.
The Labour party had threatened to freeze all bills if elected in 2015 and the shadow energy secretary, Barry Gardiner, was scathing about Ofgem’s proposals and apparent government inaction.
“The Tories have sat back and done nothing while Ofgem is failing in its duty as the regulator,” Gardiner said. “I challenge Ofgem’s chief exec, Dermot Nolan, to name any other purchase where consumers are being swindled out of £1.9m a day and the regulator turns round and says: ‘It’s the customers’ fault. They should switch to another supplier!’ This is not regulation, it is aiding and abetting the offender.”
Ed Kamm, the UK managing director for First Utility, one of the largest independent suppliers, criticised the plans. He said the CMA’s report rightly identified the problem that 70% of UK households were overpaying for their energy.
He added: “But the [Ofgem] proposals put too much onus on the customer, don’t go far enough and the timing of their implementation is baffling. Ofgem itself admits that consumers who are already engaged in the market will see the first benefits.
“We are in real danger of continuing to fuel a ‘tale of two markets’ – helping those who already shop around and doing little to properly help those who are continuing to pay much more than they need to or should.”
Mark Todd, the co-founder of the switching service energyhelpline.com said customers on standard metre tariffs would remain “on square one”.
He added: “As is Ofgem’s way, the onus still lies with the customer to be proactive and shop around to avoid being ripped off. Unfortunately, the average household only switches once every nine years, costing themselves roughly £300 a year or £3,000 over a decade.”
Byron Orme, a research fellow at the Institute for Public Policy Research (IPPR), said Ofgem’s move should be the beginning and not the end of a reform process, given that those on lower incomes and the over-65s were likely to remain disengaged and overcharged.
Orme added: “The government has a continuing role to play in protecting the most vulnerable customers. Action must continue beyond these reforms to include measures that materially reduce people’s bills. By far the best way to achieve this is through investment in energy efficiency improvements to ensure that costs are brought down and kept down.”
Meanwhile, the green energy company Ecotricity pledged to resist Ofgem’s efforts to force suppliers to share customer data with the entire energy market.
Dale Vince, Ecotricity’s founder, said: “After two years of deliberations the proposals from CMA are a massive disappointment.
“They ducked the one big issue before them: cracking down on the abuse of the 70% of households who have never switched supplier and are subject to price gouging, where energy companies offer loss-leading tariffs to attract new customers and use longstanding customers to pay for them.
“Instead they have opted to create a new abuse: sharing of everyone’s personal data with every energy company in the land, which is likely to create a blizzard of junk mail.”
