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Low-income households 'need energy cap' Low-income households 'need energy cap'
(35 minutes later)
Millions of low-income households could see power bills cut after a watchdog's report into the UK's energy sector.Millions of low-income households could see power bills cut after a watchdog's report into the UK's energy sector.
The Competition and Markets Authority (CMA) has proposed a price cap for all households using pre-payment meters.The Competition and Markets Authority (CMA) has proposed a price cap for all households using pre-payment meters.
It has also proposed that the regulator, Ofgem, keeps a database of customers that have been on a standard rate for three years.It has also proposed that the regulator, Ofgem, keeps a database of customers that have been on a standard rate for three years.
This database will then be opened up so these customers can be targeted directly by other suppliers.This database will then be opened up so these customers can be targeted directly by other suppliers.
The proposals are designed to reform the energy market and increase competition to help consumers save money.The proposals are designed to reform the energy market and increase competition to help consumers save money.
They follow an 18-month investigation into the energy market by the CMA, sparked by the fact that households and small businesses have paid £1.7bn a year more than they should have, says BBC energy correspondent John Moylan.They follow an 18-month investigation into the energy market by the CMA, sparked by the fact that households and small businesses have paid £1.7bn a year more than they should have, says BBC energy correspondent John Moylan.
The CMA believes that those households using pre-payment meters, currently numbering four million, need protecting until smart meters are rolled out in 2020.The CMA believes that those households using pre-payment meters, currently numbering four million, need protecting until smart meters are rolled out in 2020.
Analysis: Simon Jack, BBC business editor
The customer discontent over energy bills has rumbled on for years. After countless Ofgem probes, the issue of stubbornly high prices was referred to a body with real teeth, the Competition and Markets Authority and this morning, after two years of inquiry, they bared them. The question is, how sharp are they?
Inertia costs customers well over a billion pounds a year - 70% of all customers are on their suppliers standard tariff. If they were to move, the CMA estimates they could save £300-£400 a year.
Some people find it much harder to switch - those on prepayment meters or those in debt to their existing suppliers. Here we will see price controls. A transitional price cap for four million customers until 2020.
The existence of price controls in a market that was deregulated twenty years ago will be seen by some as evidence of failure of that market.
Energy Secretary Amber Rudd said: "This is a wakeup call to the Big Six [energy providers].Energy Secretary Amber Rudd said: "This is a wakeup call to the Big Six [energy providers].
"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.""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."
More competitionMore competition
"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," said Roger Witcomb, chairman of the CMA's investigation."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," said Roger Witcomb, chairman of the CMA's investigation.
He said that, if implemented, these proposals would "shake up the industry".He said that, if implemented, these proposals would "shake up the industry".
He added: "Given the scale of the problems and the potential savings on offer, we think bold measures like giving rival suppliers the chance to contact long-standing [standard rate] customers are justified."He added: "Given the scale of the problems and the potential savings on offer, we think bold measures like giving rival suppliers the chance to contact long-standing [standard rate] customers are justified."
The CMA considered proposing price controls on standard tariffs, but decided instead to focus on increasing competition and making switching easier.The CMA considered proposing price controls on standard tariffs, but decided instead to focus on increasing competition and making switching easier.
Mr Witcomb said consumers who had switched had saved hundreds of pounds, but those who had not were paying more than they needed to.Mr Witcomb said consumers who had switched had saved hundreds of pounds, but those who had not were paying more than they needed to.
The CMA also proposed:The CMA also proposed:
It also wants to end termination fees that discourage switching.It also wants to end termination fees that discourage switching.
The proposals are designed to encourage competition and make it easier for consumers to get the best deal.The proposals are designed to encourage competition and make it easier for consumers to get the best deal.