WHEN the UK energy secretary insists that competition in the market is “clearly working”, it’s hard to resist concluding that the industry lobby is as powerful as ever.
Suppliers clearly aren’t working in the interests of customers. The same may be said for Ed Davey with regard to the electorate. The energy minister’s recent claim that the government is “winning the war” on energy bills looks quite ridiculous this weekend.
Over the past two weeks the so-called Big Six have finally cut their energy prices, passing on a recent fall in the wholesale gas price. However, while plunging oil prices have pushed the wholesale price down by almost a fifth in two months and by nearly 40 per cent since the most recent peak, the Big Six have trimmed their bills by an average of 4 per cent.
The average reduction announced by EDF last Tuesday is a pathetic 1.3 per cent. At least that one comes into force relatively soon, on 11 February, while other suppliers are waiting until after winter. The SSE move doesn’t come into force until the end of April, for no good reason other than to maximise the supplier’s winter profits at the expense of long-suffering (and shivering) customers.
So, with a chutzpah you could almost admire, the Big Six are responding to a Competition and Markets Authority (CMA) probe into the sector by sticking two fingers up.
On the launch of the investigation last year, the CMA said it would look for evidence of “tacit coordination” between the big suppliers and ask to what extent “price changes seem to be associated with changes in wholesale costs”.
Well, now they have their answer, as if any further confirmation were needed that the energy market is crooked.
The energy regulator’s latest monthly report on profitability estimates that supplier profits per household will reach £114 over the coming year, up from £77 a year ago.
Yet Davey maintains that the market continues to work in the interest of customers. He “confidently” predicted that competition would force the large energy firms to cut prices or “lose customers in droves to competitors”.
If it were not for minnows such as Ovo, Extra Energy and First Utility, which are finally attracting switchers in decent numbers, the market would be as much a monopoly now as when it was state-owned.
The absence of effective competition has the same effect in the energy market as it does in banking. Customers that are able and/or willing to actively engage with the market and keep moving in search of the best deal can benefit. Unfortunately, however, they are in the minority. The majority are either unwilling to engage with an industry they don’t trust, don’t know how to, or for various reasons are simply unable to.
Those who do switch can save hundreds, but it’s not a long-term solution. Labour leader Ed Miliband came under fire for his proposal to freeze energy prices if Labour were elected, but if anything that doesn’t go far enough.
Instead they should propose renationalisation, a policy that 68 per cent of people polled by YouGov in late 2013 said they would support. It may have seemed radical not so long ago, but as the Big Six continue to take their customers for fools, the public appetite for it is surely growing.