Minister pledges action to fix broken markets

The government will “look to intervene” to improve competition

The government will outline plans to intervene in broken markets in its soon to be published consumer green paper, the energy minister has told Parliament during a heated debate on power bills yesterday (16 March).

Responding to a debate in the House of Commons on energy prices, Jesse Norman said the consultation paper would set out measures to reform a series of consumer markets.

“The green paper will examine markets that are not working fairly for consumers. Where markets are not doing their job or where competition is not effective, government will look to intervene to improve competition. The green paper will provide more detail on these proposals.”

Norman added that the government would be publishing its response to last summer’s CMA (Competition and Markets Authority) energy market report “sooner rather than later”.

The minister spoke after a string of MPs lined up to criticise energy companies over their treatment of the two thirds of so-called “sticky customers” who remain on standard variable tariffs.

The debate’s main sponsor, John Penrose said that the industry was treating most of its loyal customers as “chumps – milking and ripping them off mercilessly”.

He also said that the Big 6 energy companies have no interest in making the switching process “easier or simpler”.

“We have to make switching easier: too many people find switching energy firms too expensive.”

Justifying his argument for “relative price caps” to be imposed within the energy market, he added that other industries do not automatically switch customer onto more expensive tariffs but offered incentives for customers to stay loyal.

Under Penrose’s proposal, energy companies would only be able to charge customers on SVTs 6% more than their lowest alternative tariff.

He was backed by Iain Wright, chair of the House of Commons’ BEIS (business, energy and industrial strategy) select committee, who said in the debate that energy companies “simply scoff at customer loyalty”

Wright said that attempts by energy firms to blame price rises on government imposed levies to support low carbon generation was “simply disingenuous”, pointing to the conclusions of yesterday’s Committee on Climate Change report showing that green energy policy measures only account for 9% of the average household power bill.

Ex-shadow energy secretary Caroline Flint, who had co-sponsored the debate alongside Penrose, said that the energy market was operating a “bankrupt business model”, which relied on the loyalty of customers dating back to when the energy companies had operated as regional monopolies. Flint used the Commons debate to renew her call to introduce protected tariffs for vulnerable energy customers.

Alan Whitehead, the current shadow energy minister, said it was wrong for the government and Ofgem to put the onus on customers, who he described as a “persecuted majority”, to switch suppliers.

“We need to stop talking about them as if it’s their fault,” he said.

Whitehead said that Flint’s and Penrose’s proposals were both good starting points for reform of the energy market.

“The regulatory price cap good starting idea as is the idea that sticky customers should be taken into protected tariffs or onto lowest tariff that the supplier offers.”

But Whitehead said that such proposals needed to be viewed in the context of a market where costs, like for wholesale energy, would fluctuate over time.