Ofgem has responded to the CMA’s recent two year investigation into the energy market, and revealed their proposals including supporting the call for a price cap on pre payment meters.
The CMA’s Energy Market Reforms report was published early in July and brought with it a series of proposed measures designed to drive down costs by increasing competition and to “bring in technical and regulatory changes to modernise the market and ensure it works in customers’ interests.”
Ofgem’s chief executive Dermot Nolan, said: “The CMA’s final report is a watershed moment for industry and consumers and points the way to a fairer and more competitive future. I call on energy companies and consumer groups to seize this opportunity.”
Ofgem’s response largely endorses the CMA’s findings, which found that the wholesale energy market was, broadly speaking, sufficiently competitive and that “vertical integration of the large suppliers [such as British Gas and it’s parent Centrica] was not detrimental to competition”.
The retail end of the market, however, was found to be functioning as a “two-speed market”, with two thirds of customers still stagnating on expensive tariffs, “disengaged” with the market, while those who are active and aware of switching possibilities continue to get better deals.
Ofgem have said that they will now be working with and for these disengaged customers in order to ensure that they get the best deals they can.
Part of this will involve supporting the CMA’s proposal to implement a price cap for customers with pre payment meters, who Ofgem describe as “among the most vulnerable and least likely to switch.”
The cap, which Ofgem have made clear will only be an interim cap, “will save [pre payment customers] around £75 a year from next April.”
The hope is that once smart meters are fully rolled out (expected to be in 2020), pre payment meters will eventually stop being installed and used.
The measures do not stop at helping pre payment customers though, with Ofgem also saying that they “will work closely with suppliers to help disengaged customers, who remain on expensive standard variable tariffs, to shop around and save money.”
This includes supporting the CMA’s proposal to create a database of the details of ‘disengaged’ customers who have been on expensive standard tariffs for a long time, with other suppliers able to access this database in order to offer the customers better deals.
Ofgem acknowledged the importance of customers’ privacy here, but said they are fully behind the scheme. They said: “Next year Ofgem will pilot the database service, which will allow suppliers to offer disengaged customers better value deals. Protecting the privacy and security of consumers’ data remains a priority.”
Ofgem also endorsed other proposals made by the CMA and by stakeholders, aiming to improve suppliers’ ability to “compete on innovative tariffs” and to enable third parties including price comparisons ties to “have more opportunities to strike competitive contracts with suppliers and offer exclusive offers to consumers” as well as to “engage consumers through different channels”.