Competition watchdog ‘to set cap for low-income household energy costs’

Published: Thursday 10th March 2016 by The News Editor

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Millions of vulnerable households could see their gas and electricity bills slashed under plans expected to be unveiled today in a long-awaited report into Britain’s energy sector.

The Competition and Markets Authority (CMA) will publish its “provisional decision on remedies ” after a two-year investigation amid reports that it is likely to set a price cap for low income and vulnerable customers who have pre-payment meters – around 16% of households.

But it is set to scrap plans first mooted last July to set a maximum price limit for standard variable rate tariffs, which would have seen prices cut or frozen for around 70% of customers with the Big Six providers.

The CMA will outline a range of proposals to promote switching in the industry and break the dominance of the largest suppliers, having claimed in last summer’s report that residential customers have been overpaying by around £1.2 billion a year – an estimated £40 per household.

It is believed Britain’s Big Six – British Gas, SSE, EDF Energy, npower, E.ON and Scottish Power – may also be forced to share customer data under the plans so that rivals can contact them directly and offer more competitive products.

Other plans reportedly under consideration include rules ensuring bills are sent out more often and offer clearer information on alternative tariffs available.

At the heart of the inquiry are the millions of households who have never switched, with most stuck on expensive standard variable rate tariffs.

The watchdog found last July that there was “widespread consumer disengagement” and wants to encourage customers to switch.

A regulated tariff for pre-payment meters would mean a major shake-up for the sector, but the CMA has already stopped short of the most radical proposals, such as a break-up of the Big Six.

It chose not to recommend last summer that they should be dismantled to separate power generation and supply , saying competition in wholesale markets was working well.

And the proposals for a wide-ranging price cap have been rowed back after widespread lobbying from the energy sector and criticisms that the move could in fact dissuade customers from switching.

The CMA is also likely to confirm it will ditch recently introduced rules restricting suppliers to offering just four tariffs, saying they have in fact ended up reducing competition.

Its report last July found the introduction of the four-tariff rule led to a number of the Big Six energy firms withdrawing a number of tariffs and discounts, which may have made some customers worse off.

The energy sector has already been in the spotlight in recent weeks after the latest round of bill cuts were condemned for being too late and too little.

The Big Six providers announced gas price reductions, but most were only around 5% and do not come into effect until this month, while none have cut electricity tariffs.

Published: Thursday 10th March 2016 by The News Editor

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