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Sat, 4 April 2020

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Is the energy market failing vulnerable consumers?

Is the energy market failing vulnerable consumers?

Alexandra Goodwin | Dods Monitoring

2 min read Member content

The Big Six energy companies have come under fire once again this week, following a new report that UK households overpaid by £2.2bn on energy this year. Dods Monitoring's Alexandra Goodwin looks into what's going on. 


The Big Six energy companies have come under fire once again this week, following a new report from Bulb that UK households overpaid by £2.2bn on energy this year, despite the introduction of Ofgem’s energy price cap in January.

Varying responses have been mooted, with Labour’s nationalisation plans countered by demands for greater regulation of the ‘oligopolistic’ market.

Are markets oligopolistic?

The Big Six currently maintain a 75 per cent market share for electricity and 73 per cent for gas, with the collapse of small energy companies such as Solarplicity and Our Power, highlighting a classic market oligopoly.

The Competition and Markets Authority, amongst others, have raised concerns over increased barriers to the market, with cartel-like behaviours pushing up prices and reducing consumer choice. In turn, energy prices in the UK have become unaffordable to many. In England, more than one in 10 households live in fuel poverty, but this dramatically worsens in other regions. A quarter of households are classed as fuel poor in Scotland class further 23 per cent in Wales.

Government statistics also suggest an interconnectedness between winter energy demand and seasonal increases in homelessness.

Are markets failing to protect vulnerable customers?

Questions have therefore arisen as to why energy remains unaffordable, and why the market is failing to protect vulnerable customers.

In 2016, the Lords Economic Affairs Committee ran an inquiry into whether UK energy policy has led to failures in the market. This concluded that the Government’s approach throughout the process of decarbonisation had led the UK to reduce sufficiency in electricity generation. The Lord’s Committee criticised the lack of direction, clarity and consistency in energy policy. This is a trend that can still be witnessed in the delayed publication of the energy white paper, promised in January 2019.

This year, the Public Accounts Committee launched an inquiry into whether the four regulators were failing vulnerable consumers, concluding that vulnerable customers are not adequately protected, especially when it comes to utilities.

A price cap?

It would appear the energy market’s failures are manifold, raising questions as to what can be done to tackle fuel poverty in the UK.

Ofgem have accepted that the market is not doing enough to protect energy consumers and hoped the introduction of a price cap would place consumers back at the centre of company priorities. The regulator has called for…To download the rest of the article and view a lookahead at upcoming key events around energy policy, click here.

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