Energy market harms consumers
This is some of the harm in a dysfunctional energy market immune from consumer switching. Over the past decade, energy prices have risen at a much faster rate than overall inflation, as our chart shows, with consumers’ gas prices rising faster than electricity. Standard tariffs make the highest profits. Yet consumers aren’t switching, while wholesale gas prices for this year are reported as 27 per cent lower than a year ago. Electricity prices are at their lowest point since 2012.
As Richard blogged recently, 3.8 million children live in families that have difficulty with their energy bills. And small businesses are also facing excessive costs.
An official investigation into the energy industry grinds on. An interim report from the Competition and Markets Authority (CMA) finds that 95% of dual fuel customers on Standard Variable Tariffs (SVT) could have saved between £158 to £234 a year if they had switched provider between early 2012 and early 2014.
A clear majority of customers are on the Standard tariff. Profits from these tariffs were 12% higher than the 3% average revenue from other tariffs for electricity across the large energy firms and 13% higher for gas.
The CMA said customers who did not switch were more likely to be on low incomes, over 65, living in social housing and without qualifications. Customers on Standard tariffs were also more likely to be disabled, a single parent and struggling financially.
Ofgem found that domestic consumers’ energy bills, charged by the Six Large Energy Firms, rose by a quarter over the period 2009 to 2013:
- Average domestic electricity prices grew by 24%.
- Average domestic gas prices grew by 27%.
ICIS shows the trend in wholesale energy prices:
Meanwhile, complaints to the energy watchdog, Ofgem have almost tripled as bills have soared, according to new figures. A record 52,308 complaints were made last year – a 191% increase on 2013 and more than four times the number made in 2012 (11,283).
For instance, Ofgem found that Drax met only a third of its obligations under the community energy saving programme (Cesp). Generators and energy suppliers were required to provide energy-saving measures to households in low-income areas to cut carbon dioxide emissions, reduce bills and keep homes warm. Decisions on British Gas, SSE and GDF/Suez are due.
Time for energy to reconnect with democracy?