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The energy market faces price regulation and forced data sharing under measures put forward by the Competition and Markets Authority this morning (March 10), to be introduced following the conclusion of its two-year investigation in June.
The CMA has proposed a temporary price control for the 4 million customers on pre-payment meters (PPM), pending the full rollout of smart meters and wider reform of the market by 2020. It claims the measure will save PPM customers £300m a year.
The competition watchdog has also proposed the creation of an Ofgem-controlled database of disengaged customers who have been on a standard variable tariff (SVT) for more than three years, allowing rival suppliers to target their marketing to those customers.
It has suggested removing the four-tariff rule imposed under Retail Market Reform, which it says “limits competition and innovation.” It has also outlined measures to achieve greater independence for Ofgem, and to ‘reset’ the relationship between Ofgem, the Department for Energy and Climate Change (Decc) and the energy industry.
The CMA’s latest analysis claims the potential savings for customers on SVTs have risen substantially over the past two years, to more than £300 per customer. It has repeated its claim from last summer that energy customers have been overcharged by £1.7bn a year.
The measures stop short of the ‘safeguard tariff’ put forward in the CMA’s first set of proposed remedies in July 2015. This more sweeping reform would have seen a fixed maximum price for customers on standard variable tariffs while wider reforms were made.
The main remedies proposed by the CMA also include:
– Giving more data, such as customer meter numbers, to price comparison websites (PCWs) and other intermediaries, and allowing them to negotiate exclusive deals with suppliers. In return, PCWs must be transparent about how they cover the market.
– Measures to help new suppliers compete for PPM customers and reduce barriers such as personal debt issues that make it difficult for such customers to switch.
– A requirement that the approximately 700,000 households on non-Economy 7 restricted meters are allowed to switch to cheaper single-rate tariffs without requiring a meter replacement.
– A range of measures to help microbusinesses.
– Ensuring the transparency of green subsidies that go on the customer’s bill and assessing their impact beforehand, with a clear rationale for the allocation of funding to different technologies.
– Reforms to the electricity and gas settlement processes to lower costs to consumers by enabling more accurate measurement of consumption and more efficient supply – and to enable the full benefit of smart meters to be realised.
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