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  4. The House of Commons Library published a briefing paper on "The Current Energy Market Reforms in Great Britain"

The House of Commons Library published a briefing paper on "The Current Energy Market Reforms in Great Britain"

15 Mar 2017

The briefing paper covers current energy market reforms in the UK. While recommendations from this report are now being implemented, the Government has indicated further reforms are being considered. The energy market in Northern Ireland is separate and is not included. The focus of the paper is on major reforms and events; it does not provide full coverage of the Competition and Markets Authority (‘CMA’)’s Energy Market Investigation from 2016.

Successive probes and reviews of the British energy market have led select committees, Ofgem (the gas and electricity market regulator) and stakeholders to conclude that competition in this market was not “working effectively” for consumers. No evidence of “active collusion” was ever found but Ofgem ended their Retail Market Review in 2013 with a series of measures aimed at providing more clarity to consumers regarding tariffs.

In 2013, Ed Miliband announced that Labour would cap energy prices for 20 months if it won the general election. In 2014, with increased political and public interest in the energy market, Ofgem worked with the Office of Fair Trading and the CMA on a State of the Market Assessment.

Shortly after the report was published, Ofgem made an investigation reference to the CMA. It became the CMA energy market investigation. The CMA published its first set of provisional decisions on remedies on 7 July 2015 and planned to publish its final report in December 2015. Due to the volume of evidence and comments on its original findings and provisional remedies, the CMA extended the inquiry to the statutory deadline of 26 June 2016. It published its final report on 24 June 2016.

The CMA’s key findings for Domestic Consumers were:

  • Around 70% of the domestic customers of the six largest energy firms are still on an expensive ‘default’ standard variable tariff (SVT)
  • These customers could potentially save over £300 by switching to a cheaper deal
  • Customers could have been paying about £1.4 billion a year more than they would in a fully competitive market.

The principal remedies proposed by the CMA to address these challenges are:

  • Ordering suppliers to give Ofgem details of all customers who have been on their default tariff for more than 3 years, which will be put on a secure database under Ofgem control to allow rival suppliers to contact customers.
  • Introducing a temporary safeguard price control to protect customers on prepayment meters, whose options are more limited, which would reduce their bills by a total of £300 million a year.
  • Enabling price comparison websites (PCWs) to play a more active role in helping customers find the best offers for them and give access to meter data which will enable customers to search instantly for deals.

Unusually for an investigation by the CMA, there was one dissenting member of the investigating panel for one part of the proposed domestic market remedies. 

Reactions to the CMA’s findings were mixed but the Government is committed to take forward the recommendations. The Department for Business, Energy and Industrial Strategy (BEIS) announced on 14 December 2016 that Ofgem was also publishing “an energy supplier league table to increase transparency on the numbers of people on expensive standard variable tariffs.”

For more information about the Government's Report, and to download the briefing, please click here: