Big Six energy prices out of touch

With the final report of the Competition and Market Authority’s (CMA) energy market investigation due this month, Which? is calling on the regulator to set out how it will judge whether the inquiry’s proposals have successfully improved the market for consumers.

New Which? research today reveals that the gap between average Big Six standard tariffs and the cheapest tariff has widened significantly since the CMA started its investigation two years ago.

Which? analysis reveals the gap between the average Big Six standard dual fuel tariffs and the cheapest dual fuel tariffs on the market increased from £182 to £329 since 2014.

Despite significant savings available to consumers there has only been a 1.6 percentage point increase in the proportion of electricity customers, and 2.0 percentage point increase in gas customers, switching energy suppliers over the last two years.

As part of its investigation the CMA has set out its evidence on the lack of competition in the energy market – including the number of customers stuck on expensive standard tariffs, low levels of switching and the resulting cost to consumers to the tune of £1.7 billion in overpayment.

Which? remains concerned that the remedies proposed by the CMA will not lead to improved outcomes for consumers so it is today calling on the regulator to outline in its final report how it will evaluate the success of its proposals, including how they will deliver better outcomes for vulnerable customers who have never switched and are overpaying by hundreds of pounds.

The CMA should also commit to holding a review after two years to judge whether the energy market has improved for consumers.

Alex Neill, Which? Director of Policy and Campaigns, said:

“It is right that the energy market has been investigated but during this time prices have continued to soar. If consumer trust is to be restored in this market then the CMA proposals must bring about real change in the energy market to benefit consumers who have been paying over the odds for gas and electricity.

“The regulator must set out how it will measure the success of its reforms and ensure they will be effectively reviewed, so that action can be taken if competition and consumer outcomes don’t improve.”

Which? is encouraging consumers looking for cheaper energy suppliers to compare deals with Which? Switch, a transparent and impartial way to compare energy tariffs and find the best gas and electricity supplier.

More than 460,000 supporters have joined Which?’s biggest ever campaign, for Fair Energy Prices.

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Notes to Editors:

  • The ‘gap’ was measured as the difference between the average of the Big Six standard annual tariffs, and the cheapest tariff available on the market in any of the given time points. The tariffs we analysed assumed dual fuel, direct debit, and medium energy use (3100kWhs elec, 12500kWhs gas), and represent averages across all Great British regions. Data were extracted for the 27th day of every month between May 2014 and May 2016. Please see graph below.

  • Which? analysed of Ofgem domestic customers switching supplier by fuel type, and DECC Transfer statistics in the domestic gas and electricity markets in Great Britain. 1.6 percentage point increase in the proportion of electricity customers, and 2.0 percentage point increase in gas customers switching energy suppliers over the last two years (both to 12.9% respectively in the year to March 2016).

  • April 2014 – March 2015

Electricity supplier switches – 11.3% of customers

Gas supplier switches – 10.9% of customers

April 2015 – March 2016

Electricity supplier switches – 12.9% of customers

Gas supplier switches – 12.9% of customers

  • On 4th March 2016, Which? reported that people on standard tariffs could save £400 a year by switching away from a Big Six provider to the cheapest dual fuel deal on the market​. This can be seen in the graph below at February 2016.

  • Which? is also concerned about the CMA’s database proposal, which would allow rival energy companies access to a database of customers who had not switched for three or more years, to send them information on alternative deals. However, separate Which? research shows that a large proportion of this very group – four in ten (37%) – say they would likely opt out of receiving these marketing letters.

  • In its proposals on 10th March 2016, the CMA reported that the cost to consumers of an uncompetitive market now stands at £1.7 billion.​

  • Big Six standard tariffs compared to cheapest available:

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