CMA energy report calls for cap on prices for pre-payment meter customers

The Competition & Markets Commission has published its initial recommendations for increasing compet

The Competition & Markets Commission has published its initial recommendations for increasing competition in the energy marekt. Photo: Yui Mok/PA Wire - Credit: PA

Around four million households on pre-payment meters will see their power bills slashed and providers will have to share customer data to allow rivals to offer them better deals under proposals announced by the competition watchdog.

The Competition and Markets Authority (CMA) said today that British households could currently be overpaying by around £1.7billion a year.

In a long-awaited report, the CMA said it wants to set a temporary price cap for low income and vulnerable customers who have pre-payment meters, and plans to launch an Ofgem-controlled database allowing rival suppliers to offer better deals to those who have been on standard variable rates for three years or more.

Roger Witcomb, chairman of the CMA’s energy market investigation, said: “We have found that the six largest suppliers have learned to take many of their existing domestic customers – some 70% of whom are on ‘default’ standard variable tariffs – for granted, not just over prices, but with their service and quality.”

The CMA says the customers on standard variable tariffs could save an average of more than £300 a year while the cap on pre-payment meter tariffs would save those customers an average of £80 to £90 a year.

Other plans include giving price comparison websites access to meter numbers and allowing them to negotiate exclusive deals with suppliers.

The CMA also aims to ditch rules introduced by energy regulator Ofgem restricting suppliers to offering just four tariffs, saying this has ended up reducing competition.

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Dermot Nolan, chief executive of Ofgem, said the CMA’s proposals should help deliver a “better deal for consumers” and make the market more competitive, especially for the vulnerable.

Energy and Climate Change Secretary Amber Rudd said the CMA’s proposals were a “wake-up call to the Big Six”.

She added: “Energy customers should get a fair deal from a market that works for them. That’s why we called for the biggest ever investigation into the energy market and won’t hesitate to take forward its recommendations.”

However, shadow energy and climate change secretary Lisa Nandy said energy companies were still being “let off the hook”.

She said: “While a safeguard tariff for customers stuck on expensive pre-pay meters is welcome and will protect some households, we will need to go much further to make sure bills are fair and transparent for everybody else too.”

Which? executive director Richard Lloyd said: “While it is right to ensure that vulnerable customers on pre-paid meters are quickly protected, there are many people struggling with their bills who will not be helped by this price cap.

“And the regulator must make sure that releasing customer data to rival suppliers is done so that it genuinely helps people switch from the most expensive tariffs to better deals, rather than result in more unwanted nuisance calls.”

The CMA must deliver its final report by June 25.