The listed energy suppliers' share prices - Centrica (CNA) and SSE (SSE) - were unmoved by the report, but there could at least be some administrative headaches ahead. Here’s our take of some of the key points.
The ‘database of the disengaged’
The CMA estimates annual potential savings for dual fuel (gas and electricity) standard variable rate customers of the big six energy companies had reached their highest point in two years during the second quarter of the year – between £310 and £360.
The authority recommends Ofgem play a much bigger part in getting suppliers to engage with their customers, as well as making it easier for third party intermediaries and rival suppliers to communicate with customers. One way to do this is Ofgem setting up a database of disengaged customers that have been on the default tariff for three years or more.
This will allow rival suppliers to contact these customers with potentially cheaper tariffs. Currently around 70 per cent of the big six's customers are on the standard variable default tariff.
This means…
Energy suppliers will have to disclose the details of their domestic customers that have been on their variable standard tariff, or any default tariff, for three or more years to Ofgem. The CMA recommends Ofgem retain, use and disclose this data to rival suppliers.
To avoid customers suffering a bombardment of marketing material from rival energy companies, they will have the power to opt out at any time.
More power for price comparison sites
The CMA will recommend Ofgem introduces a requirement for price comparison websites accredited under the code of confidence to be more transparent in their coverage of the energy market they provide to customers. Price comparison websites should also be given access to data like customer meter numbers and allowing them to negotiate exclusive deal with suppliers.
A price cap... but for restricted meter tariffs
Restricted meter tariffs – meters where consumption at certain times is separately recorded – are excluded from many price comparison websites and other suppliers’ online search tools. This means the four million customers face difficulties in accessing information and switching tariff and/or supplier.
The CMA would have Ofgem set a price cap for these customers for a transitional period between 2017 and 2020. However, the CMA says the price cap would apply to mid-tier and smaller suppliers and therefore not reduce revenue for the big six energy groups.
Increasing competition in the wholesale market
The Department of Energy and Climate Change should carry out an impact assessment on customer bills before it decides to award a contract for difference – which supports low carbon generation – outside of the capacity auction process.
When electricity transported over large geographical areas is lost in transmission, charges will be priced on the basis of a generator’s location. At the moment charges are assigned regardless of geography or whether these areas are high generating or have a high demand for electricity.
