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Big Six ‘consistently overcharging’ customers

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18/02/2015
The Big Six are consistently overcharging ‘established’ customers – long-term patrons on standard rates – a progress report on the UK energy industry issued today by the Competition & Markets Authority (CMA) reveals.

The report, which can be viewed in full here, demonstrates that 95 per cent of dual fuel customers on standard variable tariffs could have saved between £158 and £234 annually if they’d switched provider at any point in the last five years. At present, the Big Six dominate 92.4 per cent of the market – down from 99.8 per cent five years ago.

The investigation was launched in July last year, after a referral from energy regulator Ofgem. The CMA said it was yet to reach any verdicts, but said consistently higher bills for standard rate customers indicated that the Big Six were unnecessarily overcharging long-term customers.

“We have observed that the six large energy firms have consistently charged higher prices for the SVT for gas and electricity compared with non-standard tariffs, which provides some support for the view that these suppliers can segment the market and price discriminate.”

Provisional conclusions will be published in May.

“We are pleased that the CMA is looking at ways to help energy consumers on expensive standard tariffs reduce their bills,” said Ann Robinson, director of consumer policy at uSwitch.com. “These customers have paid over the odds for their energy for far too long now, and it seems they have not benefitted fully from the recent reductions in wholesale costs.”

“The number of people switching supplier has hit rock bottom, so the key to the outcome of this investigation will be how to increase levels of consumer engagement in the market. If more of us shopped around, suppliers would have to up their game through lower prices and better customer service to attract and retain customers.”

James Padmore, head of energy at comparethemarket.com, said the findings were “hardly revelatory”, but agreed it  “important that the competition watchdog address them.” He also said the UK energy market is”fundamentally uncompetitive and functions poorly”.

“Research indicates that a third of consumers are actively “shocked” when they open their energy bill – yet the lack of consumer engagement with their energy providers, the complexity of energy bills and the fear of being without heating and power means that switching levels are low, with only around 20 per cent of consumers having switched providers,” he continued. “If everyone in the UK switched to the best tariff for them, the “energy dividend” for UK consumers would be in the region of £4 billion. The final proposals published in December to address them will need real teeth in order to change the status quo.”

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