(Bloomberg) — British consumers would have saved 1.2
billion pounds ($1.9 billion) a year from 2009 to 2013 with more
effective competition in the energy industry, according to the
U.K.’s antitrust authority.
Households could have saved as much as 160 pounds a year on
gas and electricity by switching suppliers, the Competition and
Markets Authority said in a report Tuesday. Bills need to be
easier to understand and switching must be encouraged, it said.
“The majority of us are still on more expensive default
tariffs,” Roger Witcomb, chairman of the CMA investigation,
said in a statement. “Many customers do not shop around to see
if there’s a better deal out there –- let alone switch.”
Energy regulator Ofgem requested the review after
electricity rates more than doubled in 10 years, raising concern
that utilities used their market power to increase prices. While
the probe found the industry’s structure didn’t hurt competition
or lead to excessive profits, it showed average prices for
households were about 5 percent above the “competitive
benchmark level.”
As many as 56 percent of people surveyed had never changed
suppliers, were unaware it was possible or didn’t know if they
had done so, according to the CMA. Just over a third said they
had never considered switching. The number of consumer
complaints surged fivefold from 2008 to 2013.
Complex Bills
“Consumer confidence depends on being able to understand
and feel in control of the energy we use,” said Ann Robinson,
director of consumer policy at uSwitch, a U.K. price-comparison
site. “Overcomplicated bills and ineffective annual statements
are some of the biggest barriers preventing consumers from
becoming more engaged with the market.”
The CMA advocates expanding the use of smart meters to help
customers track consumption and cut energy waste, and may
consider a price cap on the most expensive tariffs to protect
those who don’t shop around. Prime Minister David Cameron would
be wary of price controls, according to his spokeswoman.
“The starting point here is: How do we have a competitive
market that keeps bills down and makes it simpler for consumers
to switch?” Helen Bower said. “The prime minister doesn’t
think price regulation across the market is the right
approach.”
Renewables Growth
Britain’s biggest energy suppliers are Centrica Plc, SSE
Plc, Iberdrola SA’s Scottish Power, RWE AG’s nPower, Electricite
de France SA and EON SE. While keeping the lights on for homes
and businesses, they’ve also invested in low-carbon power in
recent years, nudging bills higher.
Subsidies to spur the uptake of renewables are expected to
reach 4 billion pounds a year by 2020, or 8 percent of domestic
electricity bills, the CMA said. A new auction system for
renewable capacity will help keep costs down, initially saving
about 110 million pounds a year, it said.
“We need to ensure that the process of bringing clean
electricity into the market is carried out efficiently and
transparently and at the lowest possible cost,” Witcomb said.
The watchdog’s findings are provisional and will feed into
final recommendations by year-end.
To contact the reporter on this story:
Louise Downing in London at
To contact the editors responsible for this story:
Reed Landberg at
Amanda Jordan, Randall Hackley