CMA wants consumers to vote with their feet

Today the Competition and Markets Authority has published the long awaited recommendations it believes that can help lower our energy bills. These recommendations come 22 months after Ofgem first recommended the CMA to look into the energy market, which was done essentially to kick the issue into the political long grass after Ed Miliband’s price freeze announcement had electrified political debate around energy. The CMA has however steered away from any radical structural changes in the energy market and stymied calls for the breaking up vertically integrated companies. It has rather focused on empowering consumers, increase switching and giving greater transparency. Tellingly, the CMA has indicated that Ofgem was wrong to suggest fewer tariffs would increase competition and has reversed that decision. Critics will argue that the CMA has shied away from taking on the large energy companies and favoured putting the responsibility on the consumer. However, the CMA has identified that there are significant savings to be made if there is greater consumer engagement so have taken a more softly soflty approach. This is very much in line with Government's policy and investment in greater switching campaign and Smart Meter rollout. However, maintaining a database of customers on standard tariffs will however be hugely difficult.

Shadow Energy Secretary, Lisa Nandy this morning has made no attempt to reignite the policy, rather highlighting that there are no measures to stop energy companies from mis-selling. Nevertheless, since the investigation was launched there has been a notable increase in switching and independent energy companies have grown their share of the energy market. Enabling consumers to switch and promote new entrants was always going to be lengthy strategy because habits are sticky. But the signs are there that Ed Miliband’s price freeze increased exposure and encouraged greater switching; the Government will hope that these announcements will also play their part in raising awareness, as well as taking concrete measures themselves.

Douglas McIlroy

Hill & Knowlton Strategies Search