CBI: Four things we’ve learned from the CMA’s provisional findings on the energy market

There has been a long debate about how the energy market delivers for consumers, resulting in an investigation by the Competition and Markets Authority (CMA) – the official body responsible for competition in different industries. The provisional findings and possible remedies of the energy market investigation were published last week (07/07/15).

The CBI views the investigation as a welcome opportunity to draw a line under the debate in the energy market and restore some trust in the industry. It is also an opportunity to make sure the energy market is delivering the right outcomes for consumers and the CMA’s findings identify some key areas where there is room for improvement. So what did the investigation tell us?

1. More needs to be done to help consumers engage with the energy market It is vital that customers are at the heart of the energy market, and that they have the right information and ability to engage with their energy supplier. The investigation’s provisional findings indicate that more must be done to engage those customers who are ‘sticky’ (those that have never, or rarely changed their energy supplier or the tariff). The investigation found that 34% of people said they had never considered switching supplier. For the benefit of consumers and industry, it is important that consumers can switch tariffs and suppliers easily, with the confidence that they are able to get the best possible deal.

2. Regulation must be smart and encourage innovation

The energy market is one where there is a particularly important role for regulation, for example to help protect consumers. However, the investigation recognised that some of the rules energy companies have to follow could be stopping them from trying new things that could actually benefit consumers.

One example is that energy suppliers are only allowed to offer customers four tariffs, and cannot easily offer new and innovative products to consumers. Smarter regulation can help the industry deliver more choice and attractive products for consumers.

3. Cutting our Greenhouse Gas emissions should be done at the lowest possible cost to consumers and the costs and benefits should be explained As part of the UK Climate Change Act, the UK has committed to cutting its greenhouse gas emissions by 80% by 2050, based on 1990 levels. Tackling the challenges of reducing our carbon emissions and ensuring there is enough energy being generated is important, and energy must be as affordable as possible. Much of the cost of reducing our carbon emissions ends up on consumers’ energy bills, and the investigation highlighted that the costs and benefits of this need to be better communicated to consumers.

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4. ‘Vertical integration’ does not impede competition in the energy market

A long-running debate is over energy companies that own both energy production and the supply to consumers – known as ‘vertical integration’. Some were worried that these firms have a competitive advantage over smaller suppliers, who tend not to own generation capacity.

However, the investigation’s provisional findings found that when companies own both supply and production of energy, it does not impede competition between firms. In fact, the investigation argued that it could make firms more efficient and save money that could be passed on to consumers.

So what do you think? Have you ever looked into switching energy suppliers? What would make you a more engaged customer? Let us know in the comments below or on social media via @bizdebate