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UTILITY WEEK | 14TH - 20TH JULY 2017 | 25 Customers disengaged end of the market." And the rela- tively limited nature of the cap means energy companies will be able to slightly bump up prices across the board in order to maintain margins. Ham says: "You are going to have to subsidise a proportion of customers, but if you smear those margins on everyone else you are okay." He estimates that a 10 per cent cut in bills for the approximately three million custom- ers who are eligible for Warm Home Dis- counts will raise bills by less than 1 per cent for the industry's remaining 17 million cus- tomers. Given the number of moving parts that make up an energy bill, he suspects that any cut for Warm Home Discount customers can be managed. Extending protection to the more vulner- able customers will not have much impact on competition, given how past research has demonstrated that this is a section of the market that is more likely to remain loyal to its existing suppliers. "These are not custom- ers that companies are particularly target- ing," says Thomson. The senior industry source suspects that energy companies will swallow the targeted cap that is on offer. "The guess is that as they didn't fight the prepay caps, they won't fight a small extension." Whatever the energy companies do is unlikely to assuage broader public discon- tent with what are increasingly tarnished brands, says Ham. "They're on a hiding to nothing at the moment: there is so much cynicism around the providers that whatever they do will be interpreted in a negative way. The market has got to a point that people don't trust the energy providers. The mini- mum they can do is to satisfy the regulator and politicians." Utilities are unlikely, therefore, to ramp up prices while Ofgem prepares its package, given how well they are hedged against fluc- tuations in wholesale prices, says Thomson, adding: "It would be a very brave supplier who would put in a significant price hike while this consultation is going on." Clark gave Ofgem's proposals a lukewarm welcome, saying they were a "step in the right direction". However, given the politi- cal backlash to Ofgem's announcement, the weakened government will remain under pressure to act tough on energy bills. Ham says: "Politicians are out to prove that they are protecting the consumers and that they care. A great way for them to move to the popular centre ground and to be aggressive and unpleasant to the energy pro- viders is highly popular." Expect more political heat from the energy debate over the next few months. How Ofgem plans to simplify switching Alongside moves to introduce a price cap for more vulner- able customers, Ofgem used last week's announcement to unveil a series of moves designed to improve the functioning of the energy market. In a bid to take the hassle out of switching, the regulator is changing the rules for price- comparison websites to make it easier for people to switch to cheaper deals. As it stands, once a customer has found a deal on a com- parison website, they have to re-enter their details on the sup- plier's own website. Ofgem has changed the rules so that cus- tomers will be allowed to sign up directly from the comparison site. In addition, they will still be able to see other deals that they cannot switch to directly by clicking a button on the compar- ison website, or by visiting the Citizens Advice website. For customers who have been on poor-value standard variable tariffs for three years or more, Ofgem will trial a new online switching service – Check Your Energy Deal. This will enable customers quickly to see how much they can save by enter- ing their address, including postcode, and the name of their current supplier. Also, Ofgem is conducting a separate trial to test whether writing to custom- ers about cheaper offers from rivals prompts them to shop around and switch tariff. Meanwhile for customers who have to have a prepayment meter because they have run up a debt, Ofgem is proposing a cap on the installation costs they will have to pay. Ryan Thomson, a partner at Baringa Partners, says that allowing customers to switch directly through to a supplier's website runs counter to the CMA's recommendation that websites should show the whole of the market comparisons. First Utility's managing director Ed Kamm says Ofgem's measures will "definitely" make switching easier. However, he says the proposals miss the big- ger picture, which is that a large chunk of the customer base doesn't even consider switch- ing. "If they are not considering switching, then knowing that it's faster doesn't really help." He says the idea of automati- cally showing customers the cheapest available tariffs needs to go beyond a trial. But he is less convinced about Ofgem's proposals on capping prepay- ment installation costs. "Nobody likes to install a prepayment meter because a customer has got into debt, but if you have to go through the whole process you could be run- ning up more than £1,000 of costs. Everyone ends up paying for the sins of the few. If people were gouging profits, it would be a different matter, but we are talking about costs." "We have to solve the anomaly that more well- off customers are the ones who are switching and they are more likely to be with small sup- pliers who are not paying into programmes like Warm Home Discount. It's a crazy situation where well-off people, who are more likely to switch, are not even con- tributing to the Warm Home Discount." TIM HAM, DIRECTOR, PEARSON HAM