LONDON (Alliance News) - The Competition & Markets Authority concluded its investigation into the UK energy market on Friday and said over 30 new measures will be introduced as a result in order to increase competition, drive down costs, and modernise the market.
The CMA is the UK's competition and consumer authority and launched an investigation after the UK energy regulator Ofgem requested one back in June 2014. The aim of the investigation was to assess whether there are any features which prevent, restrict or distort competition.
Many of the main topics highlighted by the CMA were revealed in the preliminary findings published in March, and the authority reiterated that UK customers have been paying GBP1.40 billion more per year than required as 70% of Big Six domestic customers remain on "an expensive 'default' standard variable tariff".
The CMA believes those households could save GBP300 per year each, and said it would encourage further switching.
The Big Six include London-listed firms Centrica PLC, the owner of British Gas, and SSE PLC, alongside EDF Energy, E.ON, nPower and ScottishPower.
Energy suppliers will be required to pass on details of any customers that have been on a default tariff for longer than three years, with those details being placed into a "secure" database which rival suppliers can use to target their customers.
Some analysts warned the database proposal could cause potential problems with data protection.
"Ofgem will control access to the database and carry out testing on the frequency and form of communications, to ensure it is effective in helping customers move on to better deals. Customers can opt out at any time if they wish," the CMA said Friday.
Prepayment meters, used or sometimes imposed on the poorest households in the UK, will see their annual bills limited by a "transitional price cap" which will save 4.0 million households a total of GBP300.0 million a year, the authority said.
Measures will also be introduced to revitalise competition and reduce the costs borne by customers.
"These include pressing ahead with reforming outdated systems for measuring and charging energy that distort competition between suppliers, reducing the costs of transmitting electricity and using competition to help ensure that financial support for low carbon generation is allocated at the lowest cost to customers," said the CMA.
"Modernising the market will equip it to meet future challenges and allow it to take full advantage of the forthcoming technological advances, such as smart meters, which have the potential to transform the way we use energy," said Roger Witcomb, chairman of the investigation.
Price comparison websites will also "play a more active role" by being given access to meter data which will enable customers to search instantly for deals. London-listed firms include Moneysupermarket.com Group PLC, Esure Group PLC and Zoopla Property Group PLC.
"With far too many customers paying hundreds of pounds more than they need to, they will be alerted to the better value deals that are out there and it will be easier for them to identify a good deal and switch to it. Those that can help with this process, like price comparison websites, will be given the ability to play a more active role. In other markets, they've played a big part in driving down prices, increasing switching and enabling suppliers of all sizes to reach customers and, freed up, they can do the same here," said Witcomb.
Ofgem will also be given much greater influence over the detailed codes that govern the working of the market - and which currently give undue influence to established industry participants over decisions that affect competition and consumers - and more powers to enable it to scrutinise the performance of the market and suppliers as well as the impact of policy, the CMA said.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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