Monday 29th May 2017
Margot James, Minister for Small Business, Consumers and Corporate Responsibility and Conservative MP for Stourbridge
This Government is firmly focused on getting the best deal for energy consumers and ensuring that consumer markets work for everyone.
As the Prime Minister has set out, our Plan for Britain is to build a stronger, fairer country. That means the benefits of truly competitive markets will be felt by people who currently do not think the system is working for them.
Energy is a greater leveller across society – we all need gas and electricity for our homes and businesses. Like other services and products, if you shop around you can get the best deal.
But even though more and more people are switching each year (7.7 million customers in 2016, an increase of nearly 30 per cent on the year before), they are still in the minority. Around two-thirds of Great Britain’s 27 million households are stuck on poor-value default tariffs, and all they see is energy suppliers putting their prices up.
That is in spite of Ofgem, the regulator, saying this January that they saw no justification for big price rises – increases we have subsequently seen from five of the Big Six suppliers.
Last November, thanks to Government reforms, Ofgem published for the first time a comparison of the cheapest and most expensive tariffs available. The average cheapest tariff was £252 less than the most expensive.
The implication of that is obvious: too many people are paying more than they need to for something none of us can do without.
We are already helping customers save money on their energy bills by making it quicker and easier to switch to a cheaper tariff; rolling out smart meters to bring our energy infrastructure into the 21st Century, giving people greater control over their energy use and ending inaccurate estimated bills; and helping vulnerable and low-income households with their energy bills.
The Warm Home Discount takes £140 off the energy bill of over two million people who need help the most; Cold Weather payments are made during a prolonged cold snap; and the Energy Company Obligation means that large energy suppliers have to make homes more energy efficient so they are cheaper and easier to keep warm. One million more homes will have been improved by 2020.
We absolutely expect energy companies to treat all their customers fairly, rather than announce price rises that will hit millions of people already paying more than they need to.
Around two-thirds of domestic customers are on standard variable tariffs and continue to pay considerably more than customers on fixed-term deals. The Competition and Markets Authority highlighted that such customers with the six large energy companies are losing out by an estimated £1.4 billion a year.
We have already started to tackle that problem, with Ofgem soon to introduce a price cap for customers on prepayment meters. That will protect around four million households across Britain from the beginning of this April and save many of them around £80 per year.
In general, consumers in this country enjoy strong protections and an effective regime which helps them get the best deal, but where those markets are not doing their job — where competition is not effective — the Government will look to improve competition for the benefit of customers.
In the Budget earlier this March, we set out further details about the upcoming Green Paper which will examine markets that are not working fairly for consumers. We intend to end the cycle of subscription traps, shorten and simplify small print, and introduce new powers to impose fines on companies that mistreat customers.
But there is clearly an issue in the retail energy market that requires us to look more closely at it. A fully functioning market sees engaged customers shopping around for the best deal and businesses competing to attract customers though a mix of attractive prices, innovative products, and strong customer service. All of those things inspire loyalty towards a brand. But as my boss, Greg Clark, has already pointed out, energy companies seem to be rewarding loyalty with price hikes.
Clearly we have to consider whether we need to intervene further. The situation, as it stands, is not acceptable, so the Government will shortly set out its proposals to fix the problem.