Government pledges to implement competition report

Energy Secretary Amber Rudd has pledged to implement the Competition & Markets Authority’s (CMA’s) recommendations as industry bodies welcomed the watchdog’s long-awaited report into the energy industry.

The CMA said small enterprises had been paying £280 million a year too much for their energy from the ‘big six’ power companies while domestic customers have paid £1.7 billion a year too much.
The watchdog recommended:

  • greater notice periods for “rollover” contracts for micro-businesses along with the removal of termination fees to encourage switching;
  • reforming the Contracts for Difference scheme so costs to consumers are assessed beforehand;
  • reforming gas and electricity settlement processes so more accurate readings are used, including the use of smart meters;
  • and introducing a location-based pricing system for transmission losses.

Roger Witcomb, Chairman of the CMA’s energy market investigation, said: “Over the longer term, more substantial benefit for households and microbusinesses will come from making competition work better.”

‘Wake-up call’

Rudd hailed the report as a “wakeup call to the big six”.

She added: “Energy customers should get a fair deal from a market that works for them.
“That’s why we called for the biggest ever investigation into the energy market and won’t hesitate to take forward its recommendations.”

Dermot Nolan, Chief Executive at energy regulator Ofgem, said: “The CMA’s provisional decision on remedies is an important step towards making the market more competitive and fairer for consumers, especially the vulnerable.”

Call for reform of Capacity Market too

Lawrence Slade, Chief Executive at trade body Energy UK, said: “Industry is committed to making things simpler and fairer for all, including making it easier and quicker for customers to understand their energy usage and to switch supplier.”

Most of the “big six” power companies issued statements saying they would consider the CMA’s recommendations.

Nina Skorupska, Chief Executive of the Renewable Energy Association trade body, called for the reforms to go further, extending to the Capacity Market as well as CfDs.

She added: “Our contention is that greater reforms can be introduced in the CfDs and Capacity Market schemes, which could easily be amended to incentivise innovation and more cost-effective low-carbon generation.“

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