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The imbalance of power - The Retail Market

The full liberalisation of the energy market in Britain was an international first. This experiment in competition placed consumers in the driving seat. Competitive prices would be achieved through individuals choosing the best products, and so keeping wholesale and retail prices in check. The government of the time expected ‘everyone to benefit from competition’ including ‘poorer consumers’

However, a Which? report in 2012 found that, in stark contrast to that aim, the regime of competition in energy was failing consumers. Around three quarters of consumers were paying more than they needed – a collective overpayment Which? estimated to amount to some £4bn annually.

It is vital that a critical mass of consumers successfully switches – or at least, threatens to switch – to a genuinely better deal if energy prices are to be kept in check. Yet the regulator’s own research showed that the vast majority – up to 90% - did not engage with the market. In effect, the energy ‘market’ was an oligopoly of six, large, vertically-integrated suppliers that do not face genuine competition for the vast majority of their customers.  Furthermore, the report found market conditions that made it almost impossible for consumers to see and understand the price they were currently paying or that competitors would charge them. There was therefore little chance that consumers could successfully play their allocated role as the engine of competition.

The report concluded that radical reforms were needed if competition in energy was to work. It outlined a range of solutions that Which? believed would finally give competition in the retail energy market a chance to succeed.

See our full report:

The Imbalance of Power - Which? Report 4438 Kb