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Energy market review: Suppliers face 24-hour switching Energy market review: Davey vows faster switching
(about 1 hour later)
Households could be able to switch energy suppliers within 24 hours under proposals being announced by Energy Secretary Ed Davey. Energy Secretary Ed Davey has promised to cut the time it takes to switch energy supplier to improve competition and drive down prices.
He said it was "completely ludicrous" that switching suppliers could take more than five weeks. He told MPs his "ambition" was to reduce it from the current five weeks to 24 hours, but added that the change would not "happen overnight".
He is setting out details of the plan in the Commons, as part of a review of energy competition and prices. He was announcing a review of energy prices and competition in the Commons.
Labour said the review, which reports next spring, would do nothing to help with soaring winter fuel bills. Labour said action was needed on bills now and the government was "too weak" to stand up to the energy companies.
The government is under pressure to help people facing higher gas and electricity bills, with Labour calling for a price freeze.The government is under pressure to help people facing higher gas and electricity bills, with Labour calling for a price freeze.
'Massive change' 'Faster still'
The coalition's answer has been to encourage households to switch suppliers - but Mr Davey has accused the "big six" energy companies of anti-competitive practices by "trying to make it more difficult" to do that.The coalition's answer has been to encourage households to switch suppliers - but Mr Davey has accused the "big six" energy companies of anti-competitive practices by "trying to make it more difficult" to do that.
He will promise in his Commons statement to put pressure on those six firms to speed up the switching process. He told MPs he was putting pressure on those six firms to speed up the switching process.
"My ambition is to try and get it down to 24 hours," he told BBC Breakfast. "I am challenging the industry to deliver faster switching.
"We've got obviously work with the industry to deliver that but I've already talked to one of the leading independent suppliers, First Utility, who believe they can get it down to 24 hours. "If you can change your broadband provider with a few clicks of the mouse why shouldn't you be able to do the same with your gas or electric?
"But we've got to make sure the other players are in there. So I am meeting, next month, three of the big six who have come forward, who are willing to work with me. "It shouldn't take five weeks for the change to take effect - 24-hour switching is my ambition."
"And I really think we can make a massive change here and not before time. The big six basically have been trying to prevent people from switching, make it more difficult for them to switch. That is not acceptable." He praised First Utility for making progress towards the 24-hour target and said other suppliers, including E.On, SSC and smaller independent firms had agreed to talks on speeding up switching.
"I want five-week switching to come down to one-week switching and then I want to go faster still," he told MPs.
But he added: "This will not happen overnight. We could announce 24-hour switching and then suppliers will say, 'OK, we will put up our prices to cover costs.' That cannot and will not happen."
He said he wanted to work with the industry to speed up switching but, he added, "we are are prepared to take action, if required, to compel those who drag their heels".
He said he had also urged energy companies to return cash to consumers who have over-paid through direct debits or closed their accounts.
Smaller energy companies have accused the big six of ripping off bill-payers, particularly those who remain loyal to one firm.Smaller energy companies have accused the big six of ripping off bill-payers, particularly those who remain loyal to one firm.
Mr Davey said: "Some of them clearly are making too much on some of their consumers because that's why they can make such big savings if they switch." Mr Davey told BBC Breakfast: "Some of them clearly are making too much on some of their consumers because that's why they can make such big savings if they switch."
Mr Davey is currently delivering the annual energy statement in the Commons. Labour accused the government of being "too weak" to stand up to the energy companies - and said action was needed now on soaring bills.
Shadow Energy Secretary Caroline Flint said: "We don't need another review, we need action - action to freeze people's energy bills and fix this broken market.
"Breaking up the big six by ring-fencing their generation from supply, put an end to secret deals and requiring all electricity to bought and sold via an open exchange and a tough new watchdog with the power to force these companies to cut their prices when wholesale costs fall."
She ridiculed the government's advice to consumers to shop around for the best deal, telling MPs: "Even the cheapest tariff in a rigged market will still not be a good deal."
"Each and every time they give the energy companies what they want and leave consumers to foot the bill," she added.
'Transparency''Transparency'
The review, to be led by the regulator Ofgem, together with the Office of Fair Trading (OFT) and the Competition and Markets Authority (CMA), is expected to report annually on the state of the energy market.The review, to be led by the regulator Ofgem, together with the Office of Fair Trading (OFT) and the Competition and Markets Authority (CMA), is expected to report annually on the state of the energy market.
It will examine the barriers encountered by new suppliers entering the market, scrutinise prices and profitability, and evaluate how easy customers are finding it to switch suppliers.It will examine the barriers encountered by new suppliers entering the market, scrutinise prices and profitability, and evaluate how easy customers are finding it to switch suppliers.
The review is expected to be complete by spring 2014 and would help to bring "much more transparency" to the sector, according to Mr Davey.The review is expected to be complete by spring 2014 and would help to bring "much more transparency" to the sector, according to Mr Davey.
Four of the UK's six main energy companies have recently announced price rises, with an average increase of 9.1%, and the other two are expected to follow suit soon.Four of the UK's six main energy companies have recently announced price rises, with an average increase of 9.1%, and the other two are expected to follow suit soon.
The firms say the rises are largely due to increasing wholesale prices, but Ofgem says these have risen by only 1.7% in the past year.The firms say the rises are largely due to increasing wholesale prices, but Ofgem says these have risen by only 1.7% in the past year.
Wholesale costs - the price at which energy companies buy the gas and electricity they provide to customers - make up just under half of the energy bills paid by most customers.Wholesale costs - the price at which energy companies buy the gas and electricity they provide to customers - make up just under half of the energy bills paid by most customers.
Energy firms dispute Ofgem's figures and say wholesale prices have risen by 4-8% in the past 12 months. Energy firms dispute Ofgem's figures and say wholesale prices have risen between 4% and 8% in the past 12 months.
'Stealth poll tax'
Appearing before the Energy and Climate Change Committee of MPs this week, some of the big energy companies blamed the government's social and green policies for driving up prices.
Tony Cocker, chief executive of E.On, called such costs a "stealth poll tax" and said they should be paid through the main tax system, not as part of energy bills.
Mr Cocker also told MPs there should be "a very thorough Competition Commission inquiry" into the way the UK energy market operates.
But Centrica, parent company of British Gas, later said such an inquiry was "unnecessary", adding: "There have been numerous inquiries into the energy market and none have found any evidence of anti-competitive behaviour."
At Prime Minister's Questions in the House of Commons on Wednesday, Mr Cameron clashed with Labour leader Ed Miliband on the issue of energy bills for the fourth week in a row.
The prime minister said the energy market needed "more competition and lower levies", but Mr Miliband called him "the unofficial spokesman for the energy companies" and said customers needed to "switch the prime minister".
Mr Miliband, who has pledged a 20-month energy bill freeze if Labour wins the 2015 general election, dismissed the government's review.
"How will a review that reports next summer help people to pay their bills this winter?" he asked the PM.