On 21 February 2008, Ofgem announced that it would be launching an investigation into the markets in electricity and gas for households and small businesses. In response to mounting consumer and public concern over the competitiveness of the market for gas and electricity, and as part of our work on behalf of customers, we investigated a range of aspects of the GB retail energy markets.
On 6 October 2008, we published our initial findings report from this investigation. The report outlined the following findings:
- the market is working well in important respects
- we have found no evidence of a cartel and no evidence of prices rising by more than can be justified by wholesale costs
- but competition is not yet fully effective in all sectors of the market
- active consumers are the minority (< 20%)
- consumers struggle to make effective choices
- direct selling does not always result in effective switching
- as a result some customers are doing less well out of competition
- inactive consumers - particularly “non dual fuel”
- “electricity only”
- standard credit and prepayment (PPM)
As a result, Ofgem is proposing a package of measures to address the issues it has identified which are currently out for consultation. We remain convinced that customers benefit most from a vibrant competitive market and our proposed measures aim to improve the functioning of the market. Subject to consultation, we will seek agreement with suppliers on the proposed reforms. If agreement is not forthcoming, Ofgem can refer the market to Competition Commission.
Examples of our proposed measures include:
- Measures to ban unfair price differences, including differences between payment methods. Examples include the differences between direct debit rates and those charged to prepayment or standard credit customers
- tougher rules on doorstep selling
- more transparency in financial reporting
- working with industry to address concerns around poor liquidity in the electricity wholesale market
- new requirements on suppliers to provide information to help consumers to get the best deal.
Ofgem’s probe also uncovered concerns in the small business supply market over unfairness in contract terms. We are proposing specific measures to guard against sharp practice in this part of the market.
The deadline for responding to our consultation is 1 December 2008.