What is the government's plan to tackle spiralling energy prices?

posted on 04/11/2013 10:42:10 by Dan O'Sullivan

Ed Davey says the government intends to make it easier for consumers to switch their energy supplier.

Out of pocket: consumers fear price rises will put an unbearable strain on their finances

Energy prices have been at the top of the news agenda for weeks now, with politicians and consumers calling on the government to take action in a bid to combat spiralling bills.

After numerous heated exchanges at Prime Minister's Questions and plenty of partisan posturing in the media, Ed Davey finally delivered the coalition's Annual Energy Statement last Thursday, outlining plans intended to drive down the cost of gas and electricity.

Switching on

Mr Davey made clear the government will never consider a price freeze - and there was little sign that any drastic action will be taken to stop people's bills from increasing this winter. However, as has been the case since the coalition was formed in 2010, the central piece of advice for consumers who want lower energy prices remained unchanged: switch supplier to get a better deal.

Undoubtedly this is something we strongly agree with - switching can save households more than £100, while small businesses, depending largely on their size and level of consumption, can often enjoy savings of thousands of pounds. The process isn't complicated, and 74% of our business customers say switching is easier than they initially expected.

Time is money

Our research shows that people who have their energy provided by smaller suppliers report significantly higher satisfaction levels than customers of the Big Six, indicating the importance of widening choice in the market

Yet while this is the right message, there is still plenty to be done. One of the issues is that even though Mr Davey said he eventually wants to see an arrangement where people can change supplier in the space of 24 hours, there was no commitment to a date by which this will be implemented. The only real promise was that the government would "talk" to energy companies.

Increasing the speed with which people can switch is something we advocate passionately, but the concern is the length of time any potential reforms will take to become a reality. The energy market doesn't have a great track record for making quick decisions.

A similar thing can be said of the government's move to order an annual review of the energy market - the first report will not be delivered until spring 2014, and there are no guarantees that the findings will result in any definitive action. Even if they do, who knows when any legislation might actually be presented to Parliament, let alone come into law?

Smaller suppliers

Despite these timing problems, Mr Davey did outline his intention to improve the industry as a means to encourage more independent suppliers to enter the market. 

Admittedly this isn't something that can happen overnight, but it is a promising long-term commitment that, if realised, could have genuine benefits for consumers.

Indeed, our research shows that people who have their energy provided by smaller suppliers report significantly higher satisfaction levels than customers of the Big Six, indicating the importance of widening choice in the market.

If the speed of switching can be improved and the number of suppliers significantly increased to the point where pricing becomes more competitive, consumers will undoubtedly benefit - but it's vital that these measures aren't delayed by political jostling and regulatory red tape. 

Image credit: Stuart Pilbrow

Dan O'Sullivan

Dan O’Sullivan is Make It Cheaper's Web Content Manager, which means much of his time is dedicated to ensuring we have plenty of online material to help business owners understand the energy, insurance and telecoms industries. With years of experience working alongside SMEs, Dan is committed to making life as easy as possible for smaller firms. You can email Dan at dan.osullivan@makeitcheaper.com

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