Consumers doubt the domestic energy market is “genuinely competitive” claims MP

July 5, 2009 at 3:29 pm Leave a comment

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There is consumer mistrust in the UK domestic energy market, a Labour MP has told the House.

Mark Todd secured an adjounment debate on the issue on Friday.

“People doubt how genuinely competitive it is, and some recall the hard selling of the initial period of competition,” he said.

“They have also heard, as most MPs have, of problems arising when a supplier is changed—I have dealt with some such cases myself.

“Energy provision is so important that few like to take risks—it is not like testing a new brand of breakfast cereal.”

Mr Todd told the House that until October 2008 consumers concerned about the practices of their energy company could approach Energywatch to assist them in their complaints.

“The Government decided to merge Energywatch with other consumer bodies to form Consumer Focus,” he said.

“They transferred to Ofgem—until then largely a regulator of competition within the energy sector—the task of oversight of complaint handling.

“The argument was that energy was a mature market: consumers could readily vote with their feet if they were unhappy, and companies should be the main focus of complaint handling.

“Presumably, it was argued that the existence of Energywatch, as a quasi governmental substitute, led companies to invest fewer resources in customer service and complaint handling.

“Such a robust, market-centred strategy would have much to commend it if the underlying assumptions were right.

“Those would be that consumers had appropriate information to prompt choice; that transferring to another supplier was straightforward; that there were sufficient variations in price and customer service to make changing suppliers worthwhile; and that the companies’ handling of customers was of a sufficiently high standard as not to require assistance.

“None of those assumptions is true.

“A small number of consumers switch suppliers, often playing the special offers. However, most of the market is inert, with people staying with whatever company inherited the supply from the former state provision on privatisation. Most consumers find it hard to make comparisons.

“The study by Which ? of consumer views on their bills showed widespread difficulty in understanding how the bills work and how consumers’ own behaviour might influence their bills.”

Mr Todd called on the government to ask the Competition Commissioner to investigate.

There should be “clarity on consumer assistance in the marketplace; there should be no more squabbling or turf wars,” he said.

“Secondly, I seek recognition that the market remains complex to most consumers, and that additional specific assistance is required.

“Thirdly, I seek a far more robust approach to the companies on their customer complaint handling capability. Their current shocking performance will not be corrected by market pressure.

“Fourthly, clear obligations should be placed on companies to ensure that bills and billing models are clear.

“Fifthly, if there are legal constraints on a regulator when it comes to tackling activities such as npower’s price sculpting, let us address them.”

For the government David Kidney, Under-Secretary of State for Energy and Climate Change, agreed that “we need to be active and demanding in relation to consumer concerns about energy.”

“Ofgem’s work revealed that many consumers were suffering significant disadvantages in what they were paying for their energy,” he said.

“Some practices relating to prepayment meters may have attracted most public attention and reporting at the time, but there were also broader issues of unfair charging, as described by my hon. Friend today.

“Under pressure from Government and the regulator, suppliers have taken action to remove those unfair practices, and that is a start, but all the suppliers need to continue to take responsibility for putting an end to such practices and avoiding any repetition in future.

“Ofgem is in a position to make changes to the suppliers’ licences to secure better, fairer practices from now on, and I shall be watchful to ensure that consumers get the benefits of these changes.”

Mr Kidney said the process of switching suppliers had been “made easier.”

“Our energy markets in the UK have ensured that over the past decade household consumers have benefited from some of the lowest energy prices in Europe,” he said.

“However, that is history: we need always to be vigilant on behalf of the consumer.

“I recognise that none of us, least of all Government, can be complacent about the services that paying energy customers receive. I am aiming for the best and the fairest service for all consumers.

“To achieve that ambition, I shall be calling on the regulator, the energy companies, consumer representation groups and consumers themselves to help me. I take it that I can say with confidence that my hon. Friend is willing to help, and I shall seek support from other right hon. and hon. Members.

“Regulation needs to be active and effective, attuned to current business and social standards. Where necessary, rules must be amended now and in the future to stop unfair practices.

“Those investing and operating in the energy sector need to work for the steady improvement of the ways in which the markets function for consumers.”

photo: seq@flickr.com

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