“Energy Markets Competition Remedies” – Competition and Markets Authority’s investigation has led to a positive outcome for healthy competition in the energy market

First published by Author on November 14, 2016 in the following categories: Latest and tagged with cma

The Competition and Markets Authority (CMA) has been investigating the supply and acquisition of energy in Great Britain. The two year investigation was sparked when the CMA became concerned with competition in the energy markets, and the pricing for domestic and micro business customers (micro businesses defined as with fewer than 10 employees.)

Energy market investigation

A report on the energy market investigation was published earlier this year in June. The findings of the report were that consumers and micro businesses were paying more than what they needed to.

The CMA proposed modern reforms which are designed to help consumers and micro businesses alike get a better deal on their energy supply, which included protecting customers on prepayment meters. In all, the CMA wanted to make reforms in the energy market so that consumers and micro businesses could make well-informed choices about which supplier they should use.

Why is this important?

It’s important for lay persons like you and I to be informed on good energy deals, but, prior to the CMA’s investigation, that was not always the case. Post-review, the CMA has implemented remedies for consumers and micro businesses. Through their research, the CMA found that domestic and micro business customers had been paying £1.4 billion a year more than they would have if the energy markets were competitive. They also found that 45% of those customers were stuck on the ‘default’ tariffs which were charged on a standard variable rate.

These reforms are important to help customers faced with paying extortionate energy prices, and for consumers to better understand what is happening in the energy markets without all the business jargon!

Remedies

The CMA is piloting a database filled with information about domestic and micro business customers and their energy usages on a ‘default’ tariff for more than three years. Ofgem will then create the database, making it available to competing suppliers so they can send offers to customers based on their actual usage and not chargeable on a variable tariff. Chairman of the energy market investigation, Roger Witcomb, has praised the database remedy as he believes “it will bring cheaper price offers directly to those customers”.

What is great with the remedy is that smaller businesses can benefit from this remedy too. It’s clear that some small businesses are also paying a greater premium than they should. With access to the database, it will enable them to consider all prices and deals, meaning they will no longer be tied down or restricted to the most expensive contracts.

Another remedy will introduce a price cap for prepayment meters. The CMA are looking to enforce this from April 2017 for 4 million households in Great Britain. The benefits arising from having a cap could reduce annual bills by around £300 million. The price cap is looking to challenge the issues that stop customers having full access to better deals available.

Positive outcome

CMA’s investigation has uncovered some dark truths in the energy market. However, the reforms and remedies that the CMA has imposed will most certainly benefit domestic and micro business customers in their search for a fair and cheaper energy deal.