Energy market review: Ed Davey vows to speed up supplier-switching

 

Ed Davey: "24-hour switching is my ambition"

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Energy Secretary Ed Davey has promised to cut the time it takes to switch energy supplier to improve competition and drive down prices.

He told MPs his "ambition" was to reduce it from the current five weeks to 24 hours, but added that the change would not "happen overnight".

Mr Davey also promised "criminal sanctions" for companies found to have manipulated the energy market.

Labour accused the government of being "too weak" to stand up to energy firms.

Analysis

Energy prices have become a real political headache for the coalition for three reasons:

First they have come to symbolise the general debate over living standards and how to address the gap between the speed at which prices are rising compared to wages.

Second, Labour believes it has hit on a simple and effective idea to freeze prices for 20 months - and ministers have struggled to articulate a powerful enough critique of that proposition.

And third, the companies themselves (or at least four of them so far) have put up their prices on average by 9% - seemingly inured to public outrage and political frustration.

Today saw the first concrete step in the government's answer to the issue.

More teeth for the regulator plus criminal sanctions for the firms if they fix the market will all resonate to some extent.

But today was just a warm up for the main event - next month's autumn statement - when ministers will have to say how they plan to make good on their promise to roll-back green taxes in order to reduce people's bills.

If that doesn't put some cash back in people's pockets, the government will risk looking impotent in the face of the "big six".

The secretary of state was announcing a new annual review of the energy market in a Commons statement.

The government has been under pressure to help people facing higher gas and electricity bills, with Labour calling for a price freeze.

The coalition's answer has been to encourage households to switch suppliers - but Mr Davey has accused the "big six" energy companies of anti-competitive practices by "trying to make it more difficult" to do that.

He told MPs: "I am challenging the industry to deliver faster switching.

"If you can change your broadband provider with a few clicks of the mouse why shouldn't you be able to do the same with your gas or electric?

"It shouldn't take five weeks for the change to take effect - 24-hour switching is my ambition."

He praised First Utility for making progress towards the 24-hour target and said other suppliers, including E.On, SSC and smaller independent firms had agreed to talks on speeding up switching.

He conceded that the reforms would not "happen overnight", but said the government was prepared to "compel those who drag their heels".

Ministers will also launch a consultation on "increasing the sanctions for manipulation of the energy markets, so that they carry criminal penalties for the first time", the Lib Dem MP added.

The review he has announced will be led by the regulator Ofgem, together with the Office of Fair Trading (OFT) and the Competition and Markets Authority (CMA), and is expected to report annually from spring 2014 on the state of the energy market.

It will examine the barriers encountered by new suppliers entering the market, scrutinise prices and profitability, and evaluate how easy customers are finding it to switch suppliers.

Fuel bill breakdown

But Labour's shadow energy secretary Caroline Flint said: "We don't need another review, we need action - action to freeze people's energy bills and fix this broken market.

"Breaking up the big six by ring-fencing their generation from supply, put an end to secret deals and requiring all electricity to bought and sold via an open exchange and a tough new watchdog with the power to force these companies to cut their prices when wholesale costs fall."

She ridiculed the government's advice to consumers to shop around for the best deal, telling MPs: "Even the cheapest tariff in a rigged market will still not be a good deal."

Mr Davey said if his shadow Caroline Flint had "secret information" of cartel activity then she must confirm the competition regulator is aware of it so it can investigate.

Caroline Flint: "We have heard...excuses for why people's bills are going up"

Ofgem's Chief Executive Andrew Wright said the regulator's reforms, which include limiting each supplier's number of available tariffs to four and requiring them to display their cheapest deals on bills, were delivering a "simpler, clearer and fairer market for consumers".

But Which? executive director Richard Lloyd said Mr Davey's proposals were "too little too late".

Speaking on BBC Radio 4's World at One programme, he said: "Frankly, asking regulators - the competition authorities and Ofgem - to do a review to see if this market is working competitively is a bit of a joke: it's asking the regulators to do their day job."

Four of the UK's six main energy companies have recently announced price rises, with an average increase of 9.1%, and the other two are expected to follow suit soon.

The firms say the rises are largely due to increasing wholesale prices, but Ofgem says these have risen by only 1.7% in the past year.

Wholesale costs - the price at which energy companies buy the gas and electricity they provide to customers - make up just under half of the energy bills paid by most customers.

Energy firms dispute Ofgem's figures and say wholesale prices have risen between 4% and 8% in the past 12 months.

 

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  • rate this
    0

    Comment number 893.

    Nice if my Scottish Hydro TCHC tariff actually figures on any comparison site. Comparison sites are only potentially viable if all tariffs are shown/ The hot air about these from politicians is a waste of space.

  • rate this
    +1

    Comment number 892.

    Do you REALLY know what you are expecting your politicians to actually deliver for you? Or, is it that all you want them to do is talk about it, endlessly? Because, so far, judging by the action that's been taken, i.e no action, you voters give the impression of just wanting to hear politicians to talk about it, not do anything.

  • rate this
    +2

    Comment number 891.

    So how is Davey plan going to help people pay their bills they might save £20-£30 a month but your bill is over £100 + a month it doesn't help much & year time their have do it all over again it a joke ,is this really all this government to do we them tackle the problem at the source the greedy private sector energy companies

  • rate this
    +1

    Comment number 890.

    886.rp1971 "What a load of socialist propaganda and conspiracy theory."

    So facts are now considered conspiracy theory and honesty is socialist propaganda?

    "Yeah, sure we've got some problems but really?"

    Yeah, really.

  • rate this
    +2

    Comment number 889.

    Hangman, Electric Chair, Lethal Injection.

    You're going to die, but praise us for making it easier to choose your preferred method!

  • rate this
    0

    Comment number 888.

    851. rp1971
    Funny how people seem to understand mobile phone tariffs but struggle with their energy bill. Get your calculator out and switch - it really isn't that difficult.

    -------------

    Even funnier that YOU don't understand that people can choose NOT to have a mobile phone. THINK!

  • rate this
    +5

    Comment number 887.

    885. rp1971

    "remember what it was like?"

    That was last century. The world is a much different place

    "How would a nationalised industry manage things better now?"

    Ask EDF (The French Nationalised supplier) who people in Britain are subsidsing with their huge profits?

    Ask the East Coast Rail line - Abandoned by private firm, now running better than before and more profitable?

    for starters

  • rate this
    -1

    Comment number 886.

    @882 The Alf Garnett Experience

    Only watched 5 mins and aleady regreting it. What a load of socialist propaganda and conspiracy theory. Yeah, sure we've got some problems but really?

  • rate this
    -5

    Comment number 885.

    Why do so many people on HYS say nationalising is the answer? Does anyone remember what it was like? It wasn't great and that was when energy was in abundance. How would a nationalised industry manage things better now? Significant investment is required to ensure that energy supplies are diverse and secure. That's why are bills are high. Nationalising could reduce bills but we'd pay more tax.

  • rate this
    +2

    Comment number 884.

    The electricity industry is slowly becoming like the perfume industry. Where they all charge £30 a bottle (and if no one breaks ranks), it's a gold mine.

  • rate this
    +5

    Comment number 883.

    Just changed this week from nPower,to be told yes itll take 5 weeks.So it'll straddle a payday,invariably get messed up,I'll pay 2 firms 2 energy bills and as in my last switch from Eon to nPower get so utterly confused it'll take months to sort.As in the farcical supermarket 'price checks' you save minimal pounds at the cost of maximum disruption.

  • rate this
    +1

    Comment number 882.

    May I suggest you all take time to WATCH this documentary...

    http://www.youtube.com/watch?v=5fbvquHSPJU

    You won't regret it.

  • rate this
    +3

    Comment number 881.

    Switching supplier in this day of modern technology should be as easy as flicking a switch. There is simply no need for it to take several weeks for folk to change supplier if they so wish and the energy suppliers, quite rightly, should be brought to task over this matter.

    I have changed supplier for both electricity and gas over the years and on some occasions it has been a harrowing experience.

  • rate this
    0

    Comment number 880.

    every 2 years I get the next 2 years best fixed deal. found out yesterday a colleague has never swithced in his life Year on year we show the same increase ,roghly the same consumption

    fixed deals basically just mirror the annual varible increases +sometimes end up costing more

    in rising market its ni imposssible to move from a good fixed to a better one-haven't had a drop the last 2 moves

  • rate this
    +1

    Comment number 879.

    If I like a particular jam then I buy it, if no jam seems nice then maybe I'll buy a chocolate spread or nothing. A real market with real choice. I need electricity and gas, if I don't like what is on offer then what do I do? There are a tiny number of suppliers acting like a cartel? Energy isn't a market because demand is guaranteed.

  • rate this
    +1

    Comment number 878.

    "Oh sorry mate - we have to charge you for the full week because you changed provider on Monday then back to us on Thursday, but don't worry, we'll give you that back, honest. Its not like we've used excess credit from our customers estimated accounts to bolster our overall profits..."

    http://www.theguardian.com/money/2013/oct/26/british-gas-caroline-flint-credit-windfall


    HERP DERP!

  • rate this
    0

    Comment number 877.

    876.bobbins
    "Labour should keep their mouths shut we would not be in this mess if it was not for them clowns. Labour think a click of the fingers and it will change just like that. Milliband and Balls could not run a cresh never mind the country. I hope they never get in power if they do we are doomed."
    ==

    Doomed? You certainly are with your literacy.

  • rate this
    -6

    Comment number 876.

    Labour should keep their mouths shut we would not be in this mess if it was not for them clowns. Labour think a click of the fingers and it will change just like that. Milliband and Balls could not run a cresh never mind the country. I hope they never get in power if they do we are doomed.

  • rate this
    +4

    Comment number 875.

    855. pickmypocket

    "I hope the price of sweaters don't go up or we're doomed."

    Don't worry, they'd find some other way to fleece us,

  • rate this
    0

    Comment number 874.

    865.
    paul
    "Just looked up an article to see how the big six bosses reward themselves ..... It is obscene and unbelievable that 'civilized society' allowed this to develop and thrive."

    Look at this one as well if you get a chance.

    http://moneyweek.com/merryns-blog/why-the-gap-between-rich-and-poor-is-so-wide-fiat-money-13901/

    Spying with anti-terrorism laws = anti-revolution measures

 

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