Incoming chair of CMA brands default tariffs a ‘trick’

The incoming chair of the government’s competition watchdog has branded the use of default tariffs by energy companies to bump up prices as a “trick”.

The Business, Energy and Industrial Strategy (BEIS) select committee yesterday (24 April) held a pre-appointment hearing with former MP Andrew Tyrie, the government’s preferred candidate to chair the Competition and Markets Authority (CMA).

Tyrie, who headed the Treasury select committee until he retired from the House of Commons last year, was pressed by the BEIS committee’s chair Rachel Reeves on whether the CMA should have gone further on energy prices.

Describing the use of default deals as a “trick or a rip off,” he said: “Private sector bodies put people into contract terms that initially look like a good deal. For the mass of people who don’t have time to monitor these things rip off is the right word.”

Tyrie said that while the government legislation to introduce a cap on the standard variable tariffs had largely bypassed the CMA’s package of energy retail market reforms, there was “widespread public agreement that is where we need to go.”

“There is a risk with caps because they can ossify markets but the detriment here was quite large and more vulnerable consumers were likely to lose out.”

But he said he would have limited control over panels, like the one that produced the energy market recommendations, which were “fully independent” of the CMA’s board and chair.

“The property and board is not fully engaged in that process. The problem with the CMA job is that you find yourself trying to justify decisions being taken by somebody else.”

The incoming CMA head also signalled he would adopt a swift approach to tackling consumer detriment in the markets policed by the CMA.

He said: “When you spot detriment act and don’t wait because it’s likely to get worse.”

Tyrie also said he would seek to take a high profile in the wider public debate about the value of competition in the economy, adding that the UK had a historically “bad experience” of providing state aid to business.

Committee member Peter Kyle, said: “We wouldn’t have the price cap if Ofgem had even explored the limits of what the legislation would allow.”