U.K. Energy Consumers Paying $1.9 Billion Too Much, CMA Says

(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

ldowning4@bloomberg.net

To contact the editors responsible for this story:

Reed Landberg at

landberg@bloomberg.net

Amanda Jordan, Randall Hackley

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