The preliminary findings from the CMA, Competition and Markets Authority, investigation into the workings of the energy market threw up some surprising results, and some not so surprising.
For every blow struck to Ofgem‘s regulatory leadership, there was a predictable recognition of customer apathy, for every paltry profit report there was tales of market disengagement.
With the initial conclusions having thrown up new focuses, not least the role of Ofgem in market inefficiencies, and the clean bill of health given to vertically integrated Big 6 suppliers, the quotes of the market commentators and participants, regulators and politicians, have made interesting reading. We feature the best (or worse) here:
Shadow Energy Minister for the Labour party Caroline Flint seemingly having not read the CMA’s preliminary findings claimed:
“This report confirms that Britain’s energy market is broken and that radical action is needed to protect consumers.”
Ok, exactly where did it say that? How did we miss that bit? I’m pretty sure we’d have noticed it. Perhaps it was an election campaign speech that was too late to rewrite. Whatever it sure as heck didn’t chime with the CMA’s findings.
Ed Davey, Secretary of State for Energy and Climate Change, fared little better when he apparently forgot the rules of commerce saying:
“What I’m looking forward to with this inquiry is to see evidence of whether we need to go further and faster and we won’t flinch if that is what’s needed. If some of the energy companies are abusing their market power I think that is actually wrong … because they are giving the best deals for new customers and not sharing some of the benefits with their loyal customers”
Quickly followed by his seemingly Flintesque failure to have read the clean bill of health given to the Big 6 energy suppliers vertically integrated business models, Davey also promised:
“I’ve always said if there needs to be further action I certainly wouldn’t shrink from seeing an energy company broken up but that has to be done with real evidence. If the evidence from the CMA is that the next step ought to be broken up, I as a Liberal Democrat will make it clear we wouldn’t flinch from taking that tough action.”
Quite what the relevance of political hue is as unclear as the relevance to the CMA’s actual findings.
What is abundantly clear however is the vested interest of many of the commentators. Richard Lloyd, the executive director of the price comparison website Which?, said:
“This is a watershed moment for the energy market as the CMA confirms what we’ve known all along: that competition is not working”
The preliminary findings really must have been in short supply if all three of our first featured commentators hadn’t managed to read the thing.
And to complete the apparent failure to understand a word the CMA had said Lloyd added:
“The Competition and Markets Authority now needs to develop a set of solutions to repair the market and make it work for everyone, not just the suppliers. This must include establishing a fair price that people can trust, to restore consumer confidence in the energy system. Consumers will also be looking to politicians of every party to set out how they’ll deliver fair and affordable energy prices in the future.”
But it was not all ill-informed hyperbole. indeed like a rare beacon of light on a dark, dank clifftop in winter, Tim Yeo, Head of the Energy & Climate Change Select Committee, said:
“[This] Committee has repeatedly highlighted the need for greater competition in the energy market since the last general election.
“We did not need the Competition Market Authority to spend months and probably millions of pounds examining the market to tell us that more people need to switch energy supplier. We already knew there was problem for so called sticky customers who are charged more by companies because they do not shop around and switch.”
OK it’s a mouthful, but for sticky, replace apathy, and we have the CMAs actual findings: stay out of the market and you won’t get a good deal, engage and lo and behold you will.
Back then to Caroline Flint with the customary Miliband era Labour Party failure to grasp even the simplest economic concepts:
“You’d expect loyal customers to get better deals, clearly that is not the case.”
Seriously?! If you don’t engage in a market or negotiate, the business still offers you the best deal?
Perhaps Ed Davey realised the folly of his earlier protestations as he belatedly concluded:
“My message for consumers is the same as these early findings — don’t stick with a supplier if you’re not satisfied.”
Never has stating the obvious been welcomed so readily. A rare moment of sanity in the debate therefore opened only to be slammed shut by a contribution from respected energy commentator Dieter Helm, Professor of Energy Policy at Oxford University, who claimed switching suppliers is not a solution and instead seemingly with a straight face said:
“What is needed is a simple, transparent default tariff, indexed to the wholesale price, with a published fair margin, to protect the vulnerable and those who remain loyal to their suppliers”
That claim was despite the CMA having found that Ofgem’s misguided desire to limit the tariff options in the market had actually led to greater price distortion and market dissatisfaction than it had solved.
In a moment of turkey voting for Christmas proportions Jessica Lennard, Head of Corporate Affairs at Ovo Energy (who said they’re a small supplier given they have roles such as that!), said:
“The CMA investigation has taken a massive step forward in highlighting how millions of energy customers, a disproportionate amount vulnerable, are being punished not rewarded for their loyalty. The sheer scale of this will come as a shock to many people.”
Think that one through, rewarding apathy and disengagement will reduce switching, increase retention and remove in one go the market which the likes of Ovo Energy are actively, and profitably tapping into. Commercial suicide is a refreshing approach to the issues but like most comments featured here you could be forgiven for thinking perhaps that they hadn’t exactly been thoroughly thought through,
Last word then to the CMA themselves who recognising the increasingly fraught context within which the market was being viewed concluded that:
“[The increased levels of complaints seen about the energy market and therefore the need for the CMA investigation] may reflect declining quality of service; price rises; changes in reporting standards; increasing media scrutiny of the sector; or a combination of these factors”.
You can hardly blame customers for indulging in social media haranguing and bandwagon jumping when the narrative they are being fed is so polarised to the reality of the CMA’s findings. But what we cannot get away from is that engagement solves the problem of price, don’t take our word for it, take the words of the CMA.
One hopes therefore that the CMA prints out a few more copies of their final conclusions so even the least attentive commentator can get the gist of their real findings.