CMA to examine UK energy market

Industry regulator Ofgem has taken the bold step of referring the UK energy market for a full competition review to the Competition and Markets Author…

Industry regulator Ofgem has taken the bold step of referring the UK energy market for a full competition review to the Competition and Markets Authority (CMA).

The announcement was made last week (June 26th) and comes at a time when households and businesses up and down the country continue to bear the brunt of large energy bills.

Over recent years, homeowners have seen significant rises in energy costs, while providers have continued to report large profits.

This is a situation that has many people wondering what is driving this trend, with the CMA now set to give a detailed indication of the mechanics behind pricing.

Figures published by Citizens Advice show that switching rates between energy providers have now fallen to an all-time low, while the number of people reporting problems with affordability for their energy bills has grown by 21 per cent in the last year.

Overall, a recent poll by the organisation revealed four out of five consumers in the UK now support an investigation into the nation's energy market, while 73 per cent of people believe tougher regulation for the industry is required to ensure households are getting a fair deal on their essential bills.

The five most common problems reported to Citizens Advice surrounding energy in 2013/14 were shown to be issues surrounding inaccurate billing/meter readings (17 per cent), prices of tariffs (13 per cent), problems with switching suppliers (nine per cent), methods of payment (eight per cent) and complaints and redress (six per cent).

Responding to the announcement, Citizens Advice chief executive Gillian Guy commented: "People's trust in energy firms is at rock bottom. Consumers are struggling to meet costs that have risen seven times faster than earnings and our evidence shows people are increasingly dissatisfied with the service they are getting."

A key aim of the investigation will be to outline the relationship between the supply businesses and generation divisions of the UK's Big Six energy providers – British Gas, EDF Energy, E.ON UK, npower, Scottish Power and SSE.

In addition, the report will look into how increasing levels of competition within the sector can help to keep prices as low as possible for consumers in the future, as well as ways to boost transparency and overall consumer trust in the energy market.

Finally, recommendations will also be made on ways to ensure social and environmental schemes are being delivered as cheaply and effectively as possible.

General secretary of the Trades Union Congress Frances O'Grady concluded: "Energy companies have been ripping off customers for years and [the] decision to refer them to the CMA is long overdue.

"It's about time the government stood up for consumers who are sick of seeing their rising bills being used to prop up bloated profits."

A deadline for the publication of the CMA's report into UK energy competition has now been set for the end of December 2015, with an independent panel soon to be appointed to set out a timetable for each stage of the investigation over the coming months.

Posted by Joe White

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