MSE Consultation response to CMA energy market investigation 18 August 2015 at 11:01AM in Campaigns corner 5 replies 4.4K views

Former_MSE_Will

The competition regulator is looking into what works well and what doesn't work well in the UK's energy market.

We submitted the following response to its notice of possible remedies: CMA Energy market investigation.

Do let us know what you think!

paulvcarter

Your submission omits that standing charges make it almost impossible to compare different tariffs quickly and easily. They also discriminate against low users who are often the most poor and vulnerable. I have never understood why it is necessary to charge users for transport charges. These are a cost of distribution and should be met by distributors in any case.

I would also recommend that any provider should only be allowed to charge two tariffs - a fixed tariff and a variable tariff (although economy 7 would double this). There is no need for a different tariff for pay as you go meter customers. Any increased cost is easily offset by reduced credit risk and it is obscene to charge more to the poorest customers.

Finally, it is crazy that there is a higher charge for forms of payment other than direct debit. This often discriminates against older and vulnerable customers who are often very poor.

It is a pity that your response does not go outside the very limited parameters set by politicians who are clearly in the pocket of these companies.

Former_MSE_Wendy

Hi Paul. Thanks for your thoughts on our response.

Comparison sites help people compare the mix of standard charges and tariff rates, plus we've done some work in the past on Zero Standing Charge tariffs and when they might be best for people (not that often, but they can be good for some).

Your suggestion to limit tariffs to two per provider could make it easier for some but it does also affect the price differentiation point we’ve raised in our response, which we think is a big driver to get people switching.

We think we did go outside the parameters of the remedy list. We made several other suggestions that we think would make the market work better for consumers and we hope the CMA takes them on board.

footyguy

You'd probably have got a better response if you had posted this on the energy board, but I've found it now so here goes with my two pennies worth

1. Ofgem comparison site.
I'm not sure I agree with the MSE view, which to be fair, is made by someone with a vested interest.
I presume an Ofgem run comparison site would be offered free of charge to suppliers, rather than at the current typical cost of about £30 per fuel switched. (Would the ofgem site allow switches? If not then I am more tempted to favour the MSE viewpoint as that would hinder switching for many I fear)
At £30 a fuel switch, that is a cost that all suppliers that pay the existing comparison sites must be recovering from customers through their pricing. It may be that currently, in the big picture, not all that many people do switch so the cost is negligible, but the cost will only grow if a stated aim of MSE is to see customers switching more.

Maybe, assuming an Ofgem run site would include all the suppliers & all their tariffs, and remains is accurate, and includes the ability to switch through the site, then it would become the compassion site of choice compared to the commercial competition. And if it's free to the suppliers, then in time, this should help reduce prices to the customer and possibly entice other suppliers to sign up to allow switching through the site as I suspect ones that currently don't have elected to do so as they don't want to pay the hefty fees.

(You mention the cost to the supplier maybe as low as £10 fer fuel. Well I believe each commercial comparison site has it's own fees, and I struggle to see how you can offer £15 cashback if you are only earning £10 from the switch yourself)

2. Tenants switching
I think it's only the dodgy landlords that put unfair (and I use that term advisedly!) terms in tenancy contracts saying tenants may not change supplier. The reality is such terms are deemed unfair by the OFT and so are unenforcible - and if the dodgy landlord has acted so on that term, if they have not been particularly careful they may find their whole tenancy agreement is unenforcible.

Tenants can change supplier no matter what type of meter they have (providing they pay the supplier directly). However a tenant may have difficulties if they get the meter changed as they are expected to return the property at the end of the tenancy in the same condition (fair wear & tear excepted) as it was let. To avoid possible loss of security deposit, the tenant should arrange for the meter to be returned to the same type as was fitted when the property was let. This may not be easy if the PPM was fitted because of problems over a credit account, and even if it is possible, the supplier may well charge anyway.

Where a tenant pays for energy direct to the landlord (or as part of the rent) the tenant has no choice over the supplier or tariff.

3. End of term contract
As I understand it, suppliers already tell customers that their deal is coming to an end (and usually offer them a new product) and tell them what will happen if they do nothing.
They are free to switch supplier from this time without worry of any early exit fees, and even if it takes a little longer than the end date to actually switch, suppliers are supposed to maintain the current prices until such switch takes place (within reason)

Bill always state the tariff in my experience.

(There may be an issue here for those on PPMs of which I have little experience, but currently term tariffs for those with a PPM are rare if not non-existent)


4. Automatic switching of customers
I think great care need to be taken here. I don't think opting out is the answer, but to those that want it, an opt in may be the answer to those that wish to allow others to decide which supplier & tariff they should be on.


Edit: I've now posted a link to this thread on the Energy board, so hopefully you may get some more views

chanz4

ban comparison commission, after all this is recovered via bills

modsandmockers

Back in the heady old days of privatisation, it was taken for granted that a modern capitalist system of ownership could provide nothing but an improvement on the failed system of public ownership. But, imo, it simply hasn’t happened. The selling of energy to the public was quickly taken over, but more by opportunists than by capitalists. The number of headlines and complaints about the malpractices of the energy suppliers seems to be increasing at last, and that can only be a good thing. The huge bureaucracy of the regulatory authorities seems to be no better than the bureaucratic and ideological stranglehold which we all suffered from under public ownership. The fact that MSE has managed to produce eleven sides of A4 paper, large parts of which simply state the bleedin’ obvious, does not fill me with any hope of imminent improvement. Like the banks before them, the energy suppliers appear to be answering to no-one except themselves.

MSE appears to believe that the power to improve the consumer experience lies with the price comparison industry, in which it is itself is very major player. It wants to see more tariffs, and more price differentiation. The price comparison industry would certainly benefit from additional complications, but I’m not sure how they would help the customer. MSE says that ‘it is extremely important (that) people have the ability to compare all tariffs’ - I agree, but surely it would be easier with fewer tariffs rather than with more. And, of course, it would be a huge improvement if tariff prices were to be the first thing that potential customers were told (rather than the last). Once a customer has entered the postcode and been shown the tariff prices, then (if the customer chooses) let the estimates and personal projections begin - and it should be made clear that if the customer does not know his/her previous year’s consumption in kWh’s then any cost predictions will be highly unreliable.

MSE states that the ban on tiered tariffs should remain, but it seems not have worked out that the current system of variable standing charge tariffs is actually nothing more than a replacement form of the two-tier tariffs which were banned. If we have to have standing charges, then they should be fixed, and consumers would then only have to compare unit prices. Zero standing charge tariffs are useful for low users but, as my water supplier has recently decided, they don’t necessarily benefit the poor because people with multiple homes are also quite likely to be low users in each of their individual properties. My water supplier is replacing its zero standing charge tariff with a means-tested special tariff for qualifying customers.

Many of the industry practices which MSE describes are simply poor business practices that would not happen in a competitive environment. The best examples are the large debit balances which are allowed to accrue, and the late production of final bills - how many modern businesses would wait several months before issuing a final bill? But MSE is not convinced that lack of competition is the root cause of the energy suppliers’ poor management methods. MSE seems to prefer the idea of price regulation, but it seems to me that price regulation would simply give the suppliers even less incentive to offer a decent customer experience.