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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. |
The CMA also proposed: | The CMA also proposed: |
They follow an 18-month investigation into the energy market by the CMA which found that, in total, customers may have been paying about £1.7bn a year more than they would in a competitive market. | |
Lowering bills | Lowering bills |
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. |
Those using pre-payment meters tend to be the poorer and more vulnerable customers who have difficulty setting up accounts with suppliers. | Those using pre-payment meters tend to be the poorer and more vulnerable customers who have difficulty setting up accounts with suppliers. |
Roger Witcomb, chairman of the CMA's investigation, told the BBC that the price controls would lower bills by £300m in total, the equivalent of about £90 per household. | Roger Witcomb, chairman of the CMA's investigation, told the BBC that the price controls would lower bills by £300m in total, the equivalent of about £90 per household. |
Analysis: Simon Jack, BBC business editor | 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? | 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 £1bn a year - 70% of all customers are on their supplier's 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 pre-payment meters or those in debt to their existing suppliers. Here we will see price controls: namely, a transitional price cap for four million customers until 2020. | |
The existence of price controls in a market that was deregulated 20 years ago will be seen by some as evidence of failure of that market. | |
More from Simon: Inertia the big enemy | More from Simon: Inertia the big enemy |
Energy report: A spammers' charter? | |
Should energy prices be regulated? | Should energy prices be regulated? |
Energy Secretary Amber Rudd said: "This is a wake-up 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." |
Her Labour counterpart Lisa Nandy countered: "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." | |
More competition | More 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 Mr Witcomb. | "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 Mr Witcomb. |
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." |
He told the BBC there would be safeguards in place to ensure that people were not "bombarded with junk mail". | He told the BBC there would be safeguards in place to ensure that people were not "bombarded with junk mail". |
The CMA also considered proposing price controls on standard tariffs, but decided instead to focus on increasing competition and making switching easier. | The CMA also considered proposing price controls on standard tariffs, but decided instead to focus on increasing competition and making switching easier. |
Mr Witcomb said 35% of customers had not even considered switching. | |
The regulator also wants to end termination fees that discourage switching. | |
Martin Lewis, founder of MoneySavingExpert.com, said: "I welcome the cap on pre-payment meter charges. While we've heard spurious claims before that they are no longer more expensive, that's baloney - typically, pre-payment customers are paying massively more than those on dual-fuel in a market that isn't competitive." | |
Energy firms will receive the full report next week and there will be a period of consultation. | |
Centrica, which owns British Gas, said that if the proposals were "thoughtfully" implemented, they should enhance competition. But it disagreed that all energy customers had historically been overpaying by about £1.7bn a year. | |
Are you using a pre-payment meter? Do you live in a low-income household and are you affected by this story? Share your experiences with us. Email haveyoursay@bbc.co.uk with your stories. | Are you using a pre-payment meter? Do you live in a low-income household and are you affected by this story? Share your experiences with us. Email haveyoursay@bbc.co.uk with your stories. |
Please include a contact number if you are willing to speak to a BBC journalist. You can also contact us in the following ways: | Please include a contact number if you are willing to speak to a BBC journalist. You can also contact us in the following ways: |
Or use the form below | Or use the form below |