Consumers missing out on competition in energy market

07 October 2008 / by Rachael Stiles
Ofgem has found that consumers are not benefiting as much as they could from competition in the energy market, and has proposed reforms that will improve conditions and make the market competitive for everyone.

Following its probe into the British energy market, after concerns that the big six companies were conspiring to push up the price of energy for consumers, the UK energy market regulator has made a list of proposals to improve competition.

The market works well for most people, Ofgem discovered, but its reforms would make it work well for those who are often excluded, such as householders with a prepay meter installed who more often than not pay significantly more for their energy than those who pay by cash, cheque, or direct debit.

While Ofgem unearthed no evidence which indicated that a cartel is at work in the energy market, it has launched a fast track consultation on the report's findings, where it will recommend a number of 'wide-ranging reforms' that will ensure the market works better for all consumers.

First and foremost, Ofgem is concerned about bringing better value to the 4.3 million consumers in the UK that have no gas supply, and therefore are not eligible for the most competitive offers. It also emphasised that it is committed to helping vulnerable customers to make ends meet through such measures as the Fuel Action Poverty Action Programme.

Despite the millions who are not getting the best deals, Ofgem found competition in the UK energy market to be alive and well, with a good record of customers deciding to switch energy provider in order to get the best deals.

Other proposals in the report include tougher rules on doorstep selling of gas and electricity tariffs, more transparency from the companies on financial reporting, and better information for customers from their energy providers on how they can get the best deal.

Commenting on the findings, chairman of Ofgem, Lord Mogg, said that "Stronger competition in European energy markets would help to break the oil and gas link." and stressed how important it is that "the European Commission keeps up the pressure to end the abuses it has uncovered."

Ofgem acknowledged the concerns which prompted the probe into the energy market, such as double figure price rises from the major providers, but said that it "cannot completely shield consumers from spiralling prices of global commodities such as oil, gas and coal".

Ofgem has called time on the lack of competition for some consumers, and if the industry fails to cooperate, then Ofgem can refer the market to the Competition Commission for further investigation and regulation.

Age Concern welcomes the report, hoping that it will do much to improve market conditions for those who are vulnerable to price increases. For Gordon Lishman, director general of Age Concern, the research "adds further weight to the already overwhelming evidence that the energy market is not working for the poorest customers."

He points to the one in three pensioner households that live in poverty, and the half who are planning to cut back on their winter fuel bills this year by cutting back on the heat, to encourage that "urgent action" be taken to help those who need it most.

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