Analysis of energy market and adverse effects on competition in the UK

Customer Service and Protection

Jul 08
Analysis of energy market and adverse effects on competition in the UK

On 7 July 2015 – the Competition and Markets Authority (CMA) released its findings and recommendations following a year-long investigation into the energy market.  It identified two main problems that hindered both competition in the market and better outcomes for customers; these were:

  • a lack of engagement of customers in the market; and
  • shortcomings in regulation and its ability to deliver change.

The key findings were that over 30% of customers had never considered switching supplier despite significant advertising and bill/tariff comparison websites.  Approximately 70% of customers were still on their standard default tariff despite the presence of cheaper fixed rate deals, for example dual fuel customers could save 160GBP per annum by switching suppliers.  Reasons given by customers for not switching included; a lack of detail regarding the deals available, confusing and inaccurate bills and real (or perceived) difficulties in switching.

OFGEM (Office of Gas and Electricity Markets) confirmed that the findings reflected their own concerns about the market and pledged full support in developing a package of remedies for energy customers to address the problems faced.

Background:
The CMA is the UK’s primary competition and consumer authority.  It is an independent and non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and for enforcing competition and consumer law.