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Competition and Markets Authority “Energy market investigation”

This Commons Library Briefing Paper sets out the main remedies proposed by the Competition and Markets Authority (CMA) in its Summary of provisional decision on remedies  published on 10 March 2016 as part of its Energy market investigation. The full report was published on 17 March 2016.

The CMA is reaching the end of its investigation and is planning to publish its final report during June 2016.

Roger Witcomb, Chairman of the energy market investigation, said:

We have found that the 6 largest suppliers have learned to take many of their existing domestic customers – some 70% of whom are on ‘default’ standard variable tariffs[SVTs} – for granted, not just over prices, but with their service and quality

The key provisional findings for Domestic Consumers include

  • around 70% of the domestic customers of the 6 largest energy firms are still on the more expensive ‘default’ standard variable tariff (SVT)
  • that the potential savings for these customers have risen substantially over the past 2 years so that the average customer could save over £300 by switching to a cheaper deal
  • in total, customers could have been paying about £1.7 billion a year more than they would in a competitive market.

In the light of the responses to its original provisional decision on remedies in July 2015 and following further research, the CMA has retained some of the provisional decisions on remedies and introduced new proposed remedies.

The principal remedies proposed by the CMA are

  • the creation of an Ofgem-controlled database of disengaged customers who have been on a SVT for more than 3 years, which will allow rival suppliers to target their marketing to those customers.
  • a temporary safeguard price control to protect customers on prepayment meters, whose options are more limited, which would reduce their bills by a total of £300 million a year.

Unusually for an investigation by the CMA, there was one dissenting member of the investigating panel for one part of the proposed domestic market remedies.

On the Regulatory Framework the CMA aims to ‘reset’ the relationship between Ofgem, the Department of Energy and Climate Change (DECC) and the industry. Its proposals include:

  • requiring the largest suppliers to provide fuller information on their financial performance,
  • increased public consultation by DECC on policy decisions being taken that will be a major driver of consumer prices in the future.
  • reforms to the system of self-regulation of industry codes, so that Ofgem is in a better position to ensure that measures that benefit consumers are introduced promptly.

This Briefing Paper updates the Library’s earlier Paper Competition in energy markets in Great Britain which outlines the CMA’s earlier provisional decision on remedies findings and provides more on the policy history.

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