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The CMA announcement: reactions, opinions and predictions
Since the CMA released the results of their investigation of the UK energy market last week (10/03), the business world has been split in their reactions to the announcement. Upon first inspection, it would appear that there’s a lot of good news for domestic energy customers and business owners alike. However, are we being too quick to cast judgement? Is there more that needs to be considered?
To help you understand how the measures outlined in the announcement might impact business energy, we have compiled the reactions, opinions and predictions of a number of different industry experts.
For those who are not sure what the CMA announcement has in store for businesses, check out our CMA announcement summary.
Simplifying energy bills and annual statements
This year energy customers can expect huge strides to be made in simplifying bills to help develop an understanding of energy usage and how it is charged. Not only will this help businesses better understand how they are using energy, and therefore identify new and innovative ways to minimise wasteful practices, but, it will also aid businesses in the fight against rising energy prices by making it easier to identify better deals.
Talking on the topic, Ricahrd Neudegg, Head of Regulation at uSwitch.com, said: “Consumers need much clearer information to help them use less, waste less and pay less for energy. Ofgem’s reforms to overhaul confusing, over-complicated and ineffective bills and annual energy statements can’t come a minute too soon for customers.”
Ultimately, an overly complicated energy market means it can be confusing, and often inefficient, for businesses to switch their energy without the help of a broker. This leaves many business owners stranded with energy contracts that charge well above the market average. The hope is that reforming how information is delivered to customers, through bills and other methods, will give consumers the power to put a stop to this and switch with confidence.
No code of conduct
One change that many industry experts hoped for was the formation of a code of conduct that would apply to third part intermediaries (TPIs) – such as price comparison websites – operating within the industry. A view championed by the Federation for Small Businesses (FSB) – they believe that a number of unscrupulous TPIs are throwing doubt over broker activities within the market. In turn, this is damaging the reputation of services such as Make It Cheaper, who aim to help Britain’s businesses by helping them save money on their utilities.
In a press release, the FSB said, “We are disappointed that the CMA has not suggested a regulatory framework for third party intermediaries (TPIs). Many TPIs provide a valuable service to microbusiness customers, but some unscrupulous TPIs are undermining the industry as a whole.”
Adding, “Good TPIs are losing business to those willing to cut corners or act unethically. As a result, many smaller businesses do not trust the industry or the value for money that a good TPI can provide.”
The ability for TPIs to sign up to a code of conduct could go a long way to re-establishing the confidence in their ability to operate within the consumer’s interest. However, it appears that this due diligence remains the responsibility of business owners for the time being.
More choice for customers
Off the back of recent changes made by the energy industry watchdog Ofgem, suppliers in the domestic market were told they could only offer four core tariffs in an attempt to make the market easier to navigate for consumers. However, following the CMAs investigation, it has been suggested that this change has had a detrimental impact on the energy market, by restricting the choice for consumers when looking for a better deal.
First Utility, independent supplier and direct competitor of the Big Six, has praised plans to introduce more choice back into the energy market, claiming that “the Big Six keep their loyal customers in the dark about cheaper deals resulting in disengagement and a lack of trust”
“Ensuring the energy market works for consumers is key. The proposal to lift the cap on deals that providers can offer is good news. It will give consumers more choice and help companies innovate to bring costs down.”
Good progress but is it enough?
Another major criticism that the CMA has received is the fact that the investigation took two years to set up and conduct, and the results and planned actions do not reflect this substantial time frame. A look across the UK energy market would suggest an overall mixed response to the findings, but, as Cornwall Energy suggest “some elements of the package are ok, others are misdirected.”
It’s widely accepted that the investigation was indeed necessary in order to breakdown the stagnation of competition that has been caused by the monopoly of the Big Six energy companies. However, a vocal subsect of the market have suggested that more still needs to be done to achieve the breakdown of this monopoly.
Cornwall Energy has suggested that in the lengthy two year spell that the CMA had to conduct their review, more should have ultimately been achieved. In a recent summary, the company said: “…All in all, this is not a good return on two years of extensive analysis.”
However, Cornwall Energy aren’t alone in the view. In a recent statement, Executive Director of consumer body Which? Richard Lloyd agrees, suggesting that a lot more needs to be done.
Focusing on the database of “sleeper customers”, Lloyd said: “The CMA is naive to propose opening a database of customers to energy companies. The proposal would take exploited customers out of the pan and into the fire of a thousand cynical sales pitches.”
“The fact that customers who pose the lowest credit risk have been paying the highest prices is a disgrace. This overdue intervention to stop them being overcharged should bring shame on the Big Six.”
It’s believed that the true impact of the CMA investigation will not be seen until the changes come into effect in 2017. At the moment, specifics are few and far between, however we can expect more details to come to light this week, which will hopefully put to bed the concerns that some parties have around the changes.