Caroline Flint MP: The British people have 'paid the price' for failing energy market
3 min read
Former Shadow DECC Secretary Caroline Flint writes that the Competition & Markets Authority has ducked its responsibility to protect bill-payers and needs to now put the consumer first.
Energy prices have been too high for too long. That is now beyond dispute, after the Competition and Markets Authority (CMA) finally published their report on the energy market.
Their investigation followed a two year campaign from the Opposition benches demanding action to tackle over-charging by the Big Six. Remember “Freeze that Bill?”
The Government agreed to an investigation in 2104. The report: “Provisional Decision on Remedies”, is just the first stage of a two-year investigation.
What did they find?
Labour’s central accusation I made as Labour’s Shadow Energy Secretary that the Big Six energy companies were over-charging, was proved correct. At least £1.7billion a year since 2011. In fact:
• Seven out of every ten customers were being over-charged.
• Longstanding customers were rewarded with worse deals – higher prices - than those who regularly switched.
• And people with prepayment meters, many among the poorest families, were even more likely to pay over the odds.
The CMA’s decision to impose a price cap for those on prepayment meters is welcome, but is the least the CMA could do without doing nothing at all.
Prepayment meter users are just 16 per cent of consumers nationwide. Given that 70 per cent on the default single variable tariff (SVT), have been paying an average £300 a year more than they should, for the majority of customers, the overcharging will continue.
Rather than extend the protected tariff to all SVT customers, the CMA propose a customer database, where firms can access and contact their rivals’ longer-term customers.
The CMA’s proposal means more emails and marketing phone calls, many unwanted, while the onus remains on the consumer to seek out the cheapest rate and switch.
Crucially, there is no requirement for energy companies to charge fairer prices or pass on savings from lower wholesale prices.
The Big Six are undeserving of this soft treatment. Each still dominates the regions they occupied pre-privatisation. They inherited a sticky base of longstanding customers – a high proportion of people who have never switched supplier – and have struggled to penetrate markets outside of their ‘home region’.
As they keep charging loyal customers more than new ones, a picture has emerged of a dominant group who still behave like regional monopolies.
Recently, I wrote to the CMA urging them to reconsider implementing a protective tariff for SVT customers, not just for those with prepayment meters.
At least one of the investigation’s five panel members shares this view. Commission member Martin Cave published a dissenting opinion arguing that a price cap should be applied to all standard tariff customers.
There is still time for the CMA to be braver; to stand up for customers and for fair prices. I hope that the final report shows less deference for the Big Six; and ignores the steer by Business Secretary Sajid Javid, who urged the use of “market mechanisms” when he revised the terms of this inquiry.
The CMA needs to put the consumer first. It is the British people who have paid the price for this failing market for too long. Fair energy prices are long overdue.
Rt Hon Caroline Flint is the Labour MP for the Don Valley
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