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
    +1

    Comment number 53.

    He is one naive person, not to be trusted. Let's hear how many complaints received per month over a) switching and b) direct debit. And how big is the backlog? Ofgem are as good as useless, WAY behind on dealing with issues. Davey should simply stand down - useless.

  • rate this
    +28

    Comment number 52.

    He is representative of the type sort of poor calibre, morally bankrupt sort of spin doctor much the same as the shower who are running this country.
    Embarrassing. They must not be allowed to continue their ruin of our country.

  • rate this
    +4

    Comment number 51.

    The phrase 'Let them eat cake' comes to mind.

  • rate this
    +2

    Comment number 50.

    If this is really done rather than in just words, Its really a good move. Not only energy companies , any company will be scared to death if they know its costumers can switch in one day.

  • rate this
    +47

    Comment number 49.

    Took me almost 3 months to get back the £1300 I had overpaid by Direct Debit due to THEIR estimates of my annual costs with one pathetic excuse after another.

    To prevent that happening again I then decided to pay on the day the bill arrived but then I'm penalised for not paying by Direct Debit !

    Lose lose for me !

    Try your ambitions on sorting that out !

  • rate this
    +1

    Comment number 48.

    Alot of old people do not trust the Governet, or energy firms. What needs to happen is have a band of people with the force of the police who know accounts and have Lawyer skills. They have all this spying gear, yet the banksters roam free, energy firms making billions a year-then we need to ponce money from China so France can make our energy firms. THIS IS NOT A DREAM

  • rate this
    +1

    Comment number 47.

    Ms Hedegaard, what the British people want is affordable
    Fuel bills not extra taxes and EU regulations pushing prices ever upwards. Step 1 sort out the greed in the power companies, step 2 sort out the waste and pie in the sky extravagance in Brussels.

  • rate this
    +84

    Comment number 46.

    Gas Bill - £700 a year

    Electricity Bill - £600 a year

    Faster switching between products that all cost the same - Priceless

  • rate this
    +81

    Comment number 45.

    Switching energy companies is utterly pointless when the enrgy companies are collaborating with each other to coordinate prices & avoid competition.

    Until the government confronts that fundamental underlying problem all their advice will amount to is hot air & meaningless platitudes.

  • rate this
    +1

    Comment number 44.

    @24 Great idea except most of the EU actually pay far more for their gas and electricity than we do! Then there are the risks of strikes, blackouts, and the country being held to ransom. Oh the 1970's what days those were!

  • rate this
    +8

    Comment number 43.

    Yes you can save money by switching but whether it's in a day or month is largeley irrelevant. Especially as suppliers give a few weeks notice of forthcoming rises.

    I'll be moving just to spite my current provider, but the reality is that most people won't do this so.

  • rate this
    +3

    Comment number 42.

    Why is Ed Davey continuing to support the failed Tory dogma that competition alone is enough to fairly regulate energy prices?

    There is little the point in being able to switch suppliers more quickly when the energy companies act as a cartel & keep their prices artficially high?

    Also, even variable rate energy contracts have long terms & high exit fees nowadays, e.g. British Gas Online Tariffs !

  • rate this
    +49

    Comment number 41.

    The sad fact is the energy companies are in control and you have a Government that are in the pockets of the big six, so if you are waiting for the Government to do something positive you will freeze to death this winter

  • rate this
    +1

    Comment number 40.

    We have generation companies that sell electricity to the suppliers who then supply us the power..

    How about allowing us to buy direct from the energy companies and cut out the middle man.

    Simples

    PS my last posting @ #2 was a saving of £1.75 per year not a week / month a whole year!

  • rate this
    +2

    Comment number 39.

    This is a very small step. What's the point of concentrating on the switching process when what is needed is some REAL price competition? Why do we need a review to tell us what should already be obvious - the energy companies know they have us over a barrel. They price accordingly . Switching is pointless at present.

  • rate this
    +71

    Comment number 38.

    Is that it? All the esteemed minister for energy can come up with is the ability to change quickly from one profiteering tariff to another. What is it about the public mood he is failing to grasp?

    He is in effect changing nothing but has the cheek to state, "we are are prepared to take action, if required, to compel those who drag their heels". Mr. Davey it's YOU that is dragging your heels.

  • rate this
    +36

    Comment number 37.

    Can someone tell what the various regulators do? They seem to me to be over paid chocolate pokers that do nothing but write blindingly obvious reports.

    As for politicians they are once again demonstrating that they are clueless and that they have no power, that lies with a handful of wealthy companies that are allowed to ride rough shod over us all.

  • rate this
    +2

    Comment number 36.

    "We are going to consult on increasing the sanctions for manipulation of the energy markets, so that they carry criminal penalties for the first time," the Lib Dem MP said.

    It's this part that fascinates me. Does that mean the markets are being manipulated? And if so, how? And how long has it been going on for? Why do I have all these unanswered questions to begin with?

  • rate this
    +11

    Comment number 35.

    This is just tinkering at the edges whilst we are all getting hammered by the Big 6.

    Just like the review into setting up a commission to look at a the suggestion of putting together a report about competition, this is just a tactic to try to fool the public that this government is actually doing something about this major problem when in fact they are doing precisely nothing.

    PR bull.

  • rate this
    +12

    Comment number 34.

    If the Tories had not been challenged in the commons not one thing would have been done. It just proves that if votes are at risk the Tories can do something. Sadly it as got nothing to do with helping the poor in the population or to benefit the country, it is simply about winning or losing votes. This confirms once again that the Tories are not interested in the country, they wish to dictate.

 

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