Government energy tariff reforms doomed to fail without radical new measuresIncrease competition in the broken energy market
20 December 2012
Trust in the energy industry is collapsing, adverts from energy companies are confusing and consumers are reeling from the recent spate of inflation-busting price rises.
A new Which? report, 'The Imbalance of Power', today lays bare the full extent to which the retail energy market is failing consumers.
Which? argues that the government's proposals for reform are doomed to fail unless they are beefed up with radical new measures to increase competition in ways that can keep rising energy prices in check.
Inflation-busting price hikes
The report comes as new figures reveal a 19-point increase in public distrust in energy companies in the last six months with more than half (54%) of the public now saying they don't trust energy companies. Only car salesmen are distrusted more.
Which? executive director, Richard Lloyd, said: 'There has been a collapse in trust in energy companies in the last six months. After the recent round of inflation-busting price hikes and announcements about the cost to consumers of investment in the energy system, it's no wonder people are left questioning whether the price they are paying is a fair one.'
Confusing energy deals
New Which? analysis has also found that suppliers aren't playing fair when they announce and advertise energy prices.
Which? found energy companies bamboozling customers with tempting price offers in adverts that could actually leave some households worse off. And the reality of recent average price rises in the headlines in fact varies widely depending on where you live and how much energy you use. For example, some SSE customers in the North East are facing a hike of as much as 17.15% for electricity.
Rising energy prices are one of consumers' top financial concerns, yet some 75% of customers remain stuck on the most expensive tariffs.
Prime Minister's energy promise
Which? argues that the government's commitment to force energy companies to move people onto their lowest energy tariff will not be enough to guarantee a fair price for consumers because of the complexity and lack of competitive pressure in the market.
The Imbalance of Power report calls for new radical solutions to deliver a fairer deal for consumers including:
- The introduction of a single unit price so that energy prices and new deals can be easily compared at a glance – just like they are on petrol forecourt displays - allowing people to find the best deal with ease;
- Changes to improve the switching process, including cutting the time it takes to switch, to make it quicker and easier for consumers to move to a better deal; and
- For energy companies to make all tariffs available across all payment methods.
These measures, together with the Prime Minister's energy commitment, should make competition work and keep prices keen.
Consumers must get a fair energy price
But in case the outcome for consumers has not improved by 2015, Which? wants the government to reserve the right to take a further step and guarantee a fair price for people that are put on the default tariff.
Mr Lloyd, said: 'Only with tougher action to tackle this broken market will consumers be confident they're paying a fair price.'
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