28th September 2016

What the CMA Energy Market Investigation means for you

A quick intro

The Competition and Markets Authority has concluded its investigation into whether energy consumers are getting a fair deal. The long and short of it is – you’re not getting a good deal. The good news is that SME’s in the UK could be saving £180 million by switching energy suppliers.

What are the headline issues found by the investigation?

  • The poor get poorer: Energy costs of the poorest 10% are 10% of their costs versus 3% of costs for the top 10% richest people. Pre-pay consumers, who are those most in need, pay far too much at a premium of up to £320 per year.
  • Good news! There are 34 energy suppliers in the domestic space and more in business energy.
  • Should have SwitchedMy.com: Price comparison websites and third party brokers significantly reduce the time and cost of switching. However thus far 43% of consumers don’t trust them.
  • The “Big 6” energy suppliers make more profit on SME deals than domestic and large businesses. In fact profit margin from SME’s is double that in domestic and quadruple that in large businesses.
  • Don’t roll-over: Automatic energy contract renewals are up to 36% higher than standard tariffs. If you are out of contract and on “deemed rates” you could be paying up to 116% too much.
  • Transparency: The low number and use of price comparison website in the business space makes it difficult to get a cross market view of available tariffs.
  • Get switching: In 2013 45% of small businesses were on a default tariff. Furthermore, the “Big 6” has a 90% share of the market.

So, what is the CMA going to do about it?

The CMA is putting some measures in place that will help remedy the situation, some say not enough, I say every little helps!

  • A cap on pre-pay tariffs
  • Creation of an OFGEM database of “disengaged” consumers and allowing access by energy suppliers for marketing.
  • No more roll-over: Rolling you onto a fixed-term contract will no longer be acceptable and termination fees on standard tariffs will be abolished.,
  • The use of price comparison websites and other brokers will be eased by removing a number of standard licence conditions. These licence conditions include: the ban on complex tariff structures; the four-tariff rule; the restrictions on the offer of discounts; and the restrictions on the offer of bundled products.

All in all, it’s a step in the right direction, anything that raises awareness that businesses can save money on their energy bills must be a good thing.

What can you do?

With a little information, we can provide an analysis of deals available from over 25 energy suppliers. You can talk to one of our human Switchologists™ on 01772 395338 or email cutcosts@switchmy.com.

You can find the full CMA report here and here are reports from the BBC and the Financial Times.

Jess

Jess is part of the SwitchMy content team. She's worked with some of the energy sector's best known brands and helps us demystify business energy for SwitchMy users.



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