Utility Week

Customers 26 | 18TH - 24TH MARCH 2016 | UTILITY WEEK Analysis T he energy market finally learnt the pro- visional remedies from the Competition and Markets Authority (CMA) last week aer months of anticipation. Price regulation in the form of a transi- tional cap was a hot topic when the CMA requested industry responses in December, but the form of regulation the CMA seems to be planning has sparked a different debate about whether the idea assumes only pre- payment meter customers are vulnerable and isolates other customer groups. Data sharing was also a talking point and questions are being asked about the cost to consumers, facilitation and effectiveness of the measure. Price regulation for prepayment customers The CMA has decided to place a temporary price control on suppliers. The control will apply only to the four million customers on prepayment meters until 2020 – by which time the smart meter rollout is expected to be complete. The original suggestion for this remedy was that a transitional price cap would set a fixed maximum price for customers on stand- ard variable tariffs, but the CMA has backed away from this more sweeping intervention. The CMA claims the measure will save prepay customers £300 million a year because the proposed level of the cap will be generally in line with the cheapest prepay- ment tariff prices and include headroom of £25 per fuel per annum. However, Ovo Energy and opposition MPs are concerned that the CMA has watered down the remedy as a result of pressure from the big six suppliers. The CMA has proposed some action on standard variable tariffs, which apply to roughly 70 per cent of households, including a change of name to encourage consumers to switch away from them. Data sharing Perhaps more surprising is that the CMA did not shelve plans for a cloud database to facil- itate data sharing between suppliers. The aim of this is to encourage them to compete for customers who have been on a standard variable tariff for more than three years. This would be an opt-out service, which would require suppliers, prior to disclosing the customer's data to Ofgem, to send a letter explaining their opportunity to opt out. The competition watchdog has proposed the Ofgem-controlled database of disengaged customers will allow rival suppliers to target their marketing to those customers, but have restricted this marketing to postal only. This appears to be a response to industry concerns that targeted marketing could over- whelm customers who would be bombarded with marketing, thereby decreasing trust and engagement in the sector. The CMA says the database will also be "subject to strict safeguards", ensuring that customers can opt out at any time and that "communication meets strictly controlled criteria". However, it does not specify what those safeguards are. Critics have suggested that opt-out effectively means opt-in because it offers no incentive for disengaged custom- ers to engage and requires more effort from the customer to opt out – many of whom never will. As expected, the report demands the removal of the four-tariff rule because it "limits competition and innovation". The cap, introduced by Ofgem in 2014 as part of its Retail Market Review reforms, was designed to promote consumer engagement by reducing the "bamboozling" range of tar- iffs on offer and making it easier for them to understand the available deals. Another proposed remedy would shake up the price comparison website industry through greater transparency and making more data available to such sites and other intermediaries. The CMA also says the rela- tionship between the regulator, the Depart- ment of Energy and Climate Change and the energy industry needs to be reset. Other remedies for the domestic market include reducing barriers such as personal debt issues for switching, transparency of green subsidies on customers' bills, and a recommendation to Citizens Advice to Has the CMA done enough? The CMA's long-awaited proposals to reform the energy market include some unexpected remedies, but according to some critics, the regulator has still not gone far enough. Saffron Johnson reports. THEN VS NOW A lot has changed in the energy sector over the past two years while the CMA has been conducting its probe into the energy market. Big six market share of 92.5% (2014) Independents' market share: 7.5% (2014) Big six market share 86.6% Independents' market share: 13.4% Average gas bill (2014): £752 Average electricity bill (2014): £592 Average gas bill today: £747 Average electricity bill today: £582 3% 17 Number of suppliers (2014) 35 Number of suppliers today Switching levels today Switching levels, 2014/15 15%

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