Utility Week

Utility Week 10 07 15

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4 | 10TH - 16TH JULY 2015 | UTILITY WEEK U K energy suppliers face the possibility of par- tial tariff regulation under measures put forward by the Competition and Mar- kets Authority (CMA), aer the authority accused suppliers of taking advantage of disengaged customers. If the CMA's proposed rem- edies, published on Tuesday, are implemented in full, sup- pliers could be forced to offer a "safeguard tariff " with a fixed maximum price so that custom- ers who have never switched from the standard variable tariff are protected against rising costs while wider reforms are made. The CMA has put forward around 20 market reforms which broadly aim to boost competi- tion within the retail energy market and remove barriers to engagement for the 34 per cent of customers who have never switched. The CMA found that even though electricity prices have risen by around 75 per cent and gas prices by around 125 per cent in the past ten years, around 70 per cent of customers are on the default standard variable tariff and pay £160 a year more than they would if they switched to cheaper deals. The authority acknowledges that the price hikes are largely due to increases in the cost of green policies and network costs, but warned that suppliers are not forced to be competitive because they know that "sticky" customers are unlikely to leave. "The result is that some energy suppliers know they don't have to work hard to keep these customers. It's notable that there are such high levels of complaints about customer service," said the CMA's chair- man of the investigation, Roger Witcomb. However, the authority stopped short of full tariff regula- tion, even proposing to cut Ofgem's "simpler choices" Retail Market Review rules, which it says are "not having the desired effect of increasing engagement". "While one possible response might be to return to full price regulation, this would remove any prospect of reaping the ben- efits from the competitive pro- cess both now and in the future. "There are other maybe less visible factors which can have just as significant an effect on bills. We don't think that regula- tory interventions have always benefited competition and cus- tomers," Witcomb added. The CMA's report on pro- posed remedies said: "The approach to remedies that we are considering is therefore based principally on enabling competition and supporting cus- tomer engagement, while con- sidering the need for some form of protection from high prices for disengaged customers." Special report News CMA proposes partial price regulation for energy suppliers The CMA has published draft proposals from its root and branch review of the energy industry – and set out how it wants to reset regulation. By Jillian Ambrose. 24 September 2013 – Ed Miliband unveils Labour's policy to freeze energy prices and to reform the energy market during his party conference keynote speech 21 July 2014: CMA publishes the terms of reference for the investigation The CMA's energy investigation 19 December 2013: Ofgem, the Office of Fair Trading (OFT) and CMA launch state of the market assessment 26 June 2014: CMA referral made by Ofgem 1 July 2014: CMA appoints the market investigation panel with Roger Whitcomb as chair 4 August 2014: Then-ECCC chair Tim Yeo says wholesale gas markets should be included in the CMA investigation 17 October 2014: The CMA updates the investigation issues statement – formal hearings start 11 February 2014: Energy secretary Ed Davey writes to Ofgem, OFT, and the CMA giving them "areas to focus on" in their market assessment 27 March 2014: Ofgem, the OFT and the CMA complete the market assessment and conclude there is "weak competition". Ofgem outlines plans to refer the market to the CMA. "I would have expected the CMA to have analysed the role of the regulator itself in the report – we need proper regulation in the industry to stop abuses." Ecotricity founder Dale Vince "The industry is determined to drive down costs but we need clear, stable and common sense policy in order to get there." REA chief executive Nina Skorupska "Today's CMA report dispels myths about the energy industry." RWE Npower "For too long customers have been ripped off by the big six." First Utility founder and chief financial officer Darren Braham "The tinkering proposed by the CMA won't work." GMB national secretary for energy Gary Smith Reaction

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