Ovo tells the CMA loss-leading tariffs are damaging competition

Independent supplier Ovo Energy has told the Competition and Markets Authority (CMA) it believes the big six are punishing loyal customers in order to subsidise attractive tariffs for active switchers.

In its evidence to the CMA investigation into the energy market, Ovo said the big six are able to offer cheaper tariffs to attract switchers by using their large number of inactive customers to subsidise protective loss-leading tariffs.

It highlighted the widening gap between the big six’s average Standard Variable Tariff and their cheapest deals as evidence of this split energy market.

Ovo said the use of these ‘protective tariffs’ is damaging competition as independent supplier’s share of switchers rose by almost 30 per cent when they were removed from the market.

The supplier is instead calling on the CMA and a ‘pro-competition’ new government to ban loss-leading tariffs and introduce a principle of cost-reflectivity to the market to enable competition.

Ovo’s head of corporate affairs, Jessica Lennard, will call on the Government later today at the 1922 Committee’s welcome reception for incoming MPs, to not let momentum slide in the wake of the general election.

“With a price freeze off the table, some energy companies clearly think it’s back to business as usual, profiting by overcharging and underserving loyal customers. What’s needed now are strong signals from the new Government and the CMA that, far from letting the momentum slide, they’re more committed than ever to fixing this market.”

Ovo chief executive and founder, Stephen Fitzpatrick said: “There’s been a lot of uncertainty and delays, but we’re now at a point where an ambitious CMA outcome and a new, pro-competition Government can deliver real change for customers.”

Last month independent supplier Spark Energy told the CMA in a submission that it believed the big six were using white label deals to gain an extra tariff above the four allowed by the Retail Market review (RMR).