When Amber Rudd began was appointed to DECC in July, she immediately asked herself: “What are your priorities Minister?” She decided that her priorities focussed on the energy consumer and on achieving greater transparency over price and bills.
She said that the government hoped to reduce the cost of utility bills for the consumer by reducing the social and environmental levies on bills, improving the framework of competition of different energy providers and influencing consumer habits to use energy more efficiently and to make better choices in the future.
She added that Ed Miliband’s energy price freeze assumed that the government controlled wholesale costs, although this is not the case. She said that Ed Miliband as a former Energy secretary should know that, but stated that gas prices doubled and electricity prices went up 50% under the previous Labour government.
Ms Rudd added that the government: “Needed to ensure sufficient investment in the energy market because we inherited a market that was woefully under invested in”.
She said cold weather payments and winter fuel payments meant that whilst bills were rising, that fuel poverty has actually fallen under this government.
She said the government had thus far succeeded in broadening the energy market with 19 suppliers in the open market. Ms Rudd also said the government has successfully reduced 400 tariffs down to four.
This government has also made it much easier for consumers to switch their suppliers, with 240,000 switching in May 2014 alone. Ms Rudd said the government strongly encouraged switching and also stated that her department decided to refer the biggest six energy suppliers to the Competition Commission and this investigation was on going. She added that manipulation of the energy markets has now become a criminal offence for the first time.
Simon Moore from Policy Exchange said that most DECC policies added costs to energy production and attempted to reduce costs to the consumer.
He added that the retail energy market clearly has a “perception problem” but within the wider energy debate relatively little evidence had been put forward. He said there should be wide political support for the CMA’s findings on the big six when they are published.
He concluded by saying that he was not surprised that when the number of tariffs were reduced it was the cheapest tariffs which were turned off.
Ian Peters from
British Gassaid he believed consumers were getting a good deal and he also welcomed the CMA inquiry which he hoped would debunk myths about the energy market.
He said the British gas market was a complicated industry, but that the popular assertion that energy suppliers are raising prices to boost profits is: “categorically not true”.
He said the energy market had to plan well ahead to control supply often buying energy for two or three years in advance, which explained why peaks and troughs in energy prices are not immediately passed on to consumers immediately. He also said that British Gas only bought 7% of its supply from its sister company.
He said that whilst many of the green levies on included in energy bills were great schemes, it might be fairer for them to be paid for through the tax system. Mr Peters said that costs have been broadly flat which meant the equated to £45 or 5% on an average dual fuel bill.
He said that there were now 26 competitors in the market including X Energy and Oink, with smaller providers taking an increasing chunk of the market with 8% now and this is projected to increase to 11% by 2015. He added that with switching between suppliers now easier than ever before, British Gas had to work harder than ever to support customers and offering them an even better service.
He concluded by saying smart meters were becoming increasingly popular with 1.5 million installed already and people already reducing energy use as a result and receiving personalised energy reports every month. He also said over 100,000 users had already signed up to use Hive which controls heating systems from the customers mobile or smartphone.
He said evidence showed people with Hive were changing their temperature twice a day on average when most traditional consumers only changed their settings twice a year.
Prof George Yarrow said it was important to ask what consumers want. He added that in his experience they wanted low and stable energy prices. He said when consumers were offered tariffs linked to the wholesale energy market rate that there were not popular.
He added: “Security of energy supply is a consumer issue because people want to be able to turn on a switch and get light & power”.
He said that politicians had got policy wrong on climate change because whatever additional levies that are added to an energy bill need to be kept as low as possible for the consumer. He added that it was overwhelmingly the poor who were picking up a disproportionately high cost for “an administrative problem”.
He concluded by saying the consumer needed to see stability in the energy market and that this has not been achieved in recent years and predicted even more changes after the 2015 general election.