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The CMA energy market investigation - OVO's response

When the UK's competition watchdog (the Competition and Markets Authority or CMA) began its investigation into the retail energy market in June 2014 we had high hopes it would deliver genuine reform for energy customers in Great Britain.

 

However, after almost 2 years, we were disappointed with the publication of the CMA's penultimate report on 10th March.  You may have seen our CEO Stephen Fitzpatrick’s remarks calling the investigation "a complete waste of time and taxpayers' money".

 

In essence the CMA identified two problems in the market: over-pricing and low customer engagement.  In facts and figures this equates to 70% of Big Six customers stuck on high cost, out of contract tariffs, over paying to the tune of £1.7bn a year.

 

We identified a similar problem in June last year which confirmed that the gap between the cheapest deals in the market and the average Big Six standard variable tariffs was getting wider.  In fact, the problem has worsened over the past year with this gap almost [doubling] since June 2015.  

SVT price gap graph.jpg

So, the CMA has spotted the problems but what are its solutions?

 

The CMA has proposed a price cap for prepayment customers - which we're proud to say is calculated based on OVO's PAYG tariff, one of the cheapest in the market.  

 

While we welcome this solution, prepayment customers account for only [15]% of all energy customers and only 1/3rd of fuel poor households. This means there is no pricing protection for the other 2/3rds of fuel poor households (let alone all credit customers).

 

As a result we've called once again for at the very least a social tariff cap which would help the remaining 1.5 million fuel poor customers who don’t use prepayment receiving some protection from being overcharged.  

 

OVO has campaigned hard and we continue to believe that all customers should be protected from unfair exploitative pricing and have the benefit of a price cap.  Indeed this is something that the CMA considered last year.  But it seems the CMA has bowed to intense political pressure from the Big Six not to do this.

 

The CMA has also proposed removing the "whole of market" requirement from Ofgem's Confidence Code for switching sites.  This means that customers using switching sites will no longer be able to compare tariffs across all suppliers - instead they will see only those suppliers who have signed deals with the switching sites.

 

These are just two examples of solutions that fail to address the root problems of poor engagement and market wide overcharging.

 

Nevertheless, the CMA’s unambitious and ineffective proposals will not deter OVO from continuing to provide our customers with fair prices, innovative products and award winning service.

 

If you’re interested in finding out more about the CMA’s investigation and reading OVO’s formal responses, visit https://www.gov.uk/cma-cases/energy-market-investigation.