An 18-month investigation into the UK’s energy market has confirmed consumers were overcharged a total of £1.7bn but not recommended splitting the country’s ‘Big Six’ utilities as a remedy to failings in the market.
The Competition and Markets Authority (CMA), launched in June 2014, was intended to clear up once and for all whether SSE, Iberdrola’s Scottish Power, British Gas-owner Centrica, RWE npower, E.ON and EDF Energy were abusing their dominance of the market.
The prospect of all six being broken up to separate their supply from their power generation arms was avoided as other measures have been deemed adequate as corrective action.
Ofgem, the energy regulator, has been accused of being overly lenient in not taking stronger action.
The CMA has set out plans for a stronger role for Ofgem in scrutinising government policy and driving through industry change, saying that systemic problems with industry governance have caused “very substantial” detriment for customers .
It it also raised concerns over broader policies – such as policy measures on climate change and the rollout of smart meters – saying that decision-making on such policies had to be transparent and robust and that points of difference between the department for energy and climate change (DECC) and the regulator should be apparent.
The Authority said the relationship between DECC and Ofgem had to be ‘recalibrated’ to reinforce Ofgem’s independence and allow it to publish opinions on the cost of government policy. Around four million households on pre-payment meters will see their power bills slashed and providers will have to share customer data to allow rivals to offer them better deals under proposals announced by the energy watchdog.
Those on pre-payment meters will see £300m slashed off their bills in total each year – or around £80 to £90 each on average – under the regulator’s plans to protect them with a price cap until 2020.
He added the price cap will remain in place until 2020, by which time “they too will be able to benefit from our measures, and from other future developments like the roll-out of smart meters”.
Energy and Climate Change Secretary Amber Rudd said the CMA’s proposals were a “wake-up call to the Big Six”.
She added: “Energy customers should get a fair deal from a market that works for them. That’s why we called for the biggest ever investigation into the energy market and won’t hesitate to take forward its recommendations.”
Other recommendations with a direct effect on utilities’ power generation business include a provision for energy firms to report a separate balance sheet and profit and loss account for their generation and retail supply activities.
In addition the CMA said the government’s support system for investment in low-carbon generation should be carried out transparently so the impact on customer bills is calculated beforehand.