Prepayment cap should be first step.
Ofgem, the energy regulator, has announced a prepayment meter price cap effective in April. Typical customers should save around £80 a year.
Good news that will stop some of the poorest households paying more than they should.
But not enough to stop the majority of energy customers paying more than they should. As Citizens Advice points out, the government itself has expressed concern that loyal customers on standard tariffs are paying over the odds for gas and electricity.
The Competition and Markets Authority knows the problem well. Last year it revealed a total annual over-payment of £1.4 billion. It had proposed a fair default charge for customers on high standard variable tariffs but was persuaded to drop this idea and rely on competition to ensure fairness. (Citizens Advice Reigate & Banstead 15/11/16)
In truth the record of competition in delivering fair prices is dismal.
Everything depends on getting customers to ‘shop around’ and switch suppliers. Despite major efforts over many years nearly 70% have never switched. For good reason. Despite all reassurance, the industry’s reputation for trouble-free transfers and dependably lower prices is terrible.
In a market for things people have to buy it must be possible both to protect all customers from unfair charging (even loyal ones!) and encourage those who are able and want to shop around.
For the moment it seems the two regulators are happy to tell each other that competition will succeed in the end – however much it costs in the meantime.
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