Which? executive director Richard Lloyd on the truth behind spiralling energy prices.
We’ve all seen the rather undignified blame game around why our energy prices are rising.
Some people blame the cost of wholesale energy.
Some people blame the Government’s green subsidies and policies.
Some blame the ‘greedy profiteering energy fat cats’.
Some have even blamed consumers for not helping themselves when it comes to cutting back on their energy use or finding the best energy deals that are out there.
The truth of course is that no one group is right.
The real truth is our energy market is fundamentally failing.
No one single measure will resolve the problems that are hitting consumers hard.
We need more radical reforms across the board.
So what are the real issues that need to be resolved?
A competitive energy market
Switching is low despite three quarters of consumers being on some of the most expensive standard tariffs.
We found consumers losing out to the tune of £3.9bn a year from not being on the best deal.
Consumers need to be able to simply and swiftly switch to better deals and force the energy companies to fight over their custom.
Sadly the regulator Ofgem’s plans for reform – while a step in the right direction – will fall short of delivering this.
The public also has to have faith that the energy market is open and transparent.
At present the murky way that energy is bought and sold on the wholesale markets – often from one business to another within a single company, before it’s sold on to consumers – does not give people confidence.
This has to be the next major reform to our energy system.
Keeping costs in check
Now let’s turn to costs.
Yes, it’s right that the cost of government policies is an increasing part of our bill – around 10% of our bills, and rising.
The problem with these costs is the worrying lack of scrutiny about whether they’re being delivered at the lowest possible cost for consumers.
We need to invest in new generation.
We need to make our homes more energy efficient.
But not at any cost.
So the government needs to keep these costs in check and systematically look at each programme to see if it could be delivered more efficiently and cost effectively.
For example the Energy Company Obligation (ECO), to support the fuel poor: we’d like to see more evidence that this is delivering what the Government said it would and not just plugging any holes left by the low take-up of the Green Deal.
That’s why we want the National Audit Office to be able to take a look at the cost of all government policies on our bills.
We want quarterly reports as well as an annual audit that sends a clear message to Ministers about where they can cut costs while still delivering these vital policies.
That way Ministers and suppliers can be held to account if it’s found they’re not providing true value for money for tax payers.
Making markets work for consumers to help keep the cost of living under control
These are big changes that need to be addressed by all parties ahead of the next election.
But there is no reason why we should have to wait.
We want to see less focus on point scoring politics and more on politicians from all parties coming together to make this market more competitive, so that it works to the benefit of hard-pressed consumers.
Instead of the finger-pointing blame game, we now need clear-headed proposals that really address the root cause of these rising costs of energy and deliver more affordable energy for all.