Competition 'will help those stuck on most expensive energy tariffs'

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The chief of the UK's energy trade body says he expects to see the number of households stuck on the most expensive deals to drop.

Energy UK chief executive Lawrence Slade said competition among suppliers was putting paid to complacency among the biggest companies.

He was responding to a challenge from Business, Energy and Industrial Strategy Committee chairman Iain Wright to explain how "your members are really going to change".

Mr Wright pointed to a spate of recent price rises and latest figures showing high percentages of Big Six customers remain on the most expensive standard variable tariffs (SVTs).

Npower, EDF and Scottish Power are among those to have ramped up prices in recent months, with many blaming rising wholesale costs.

Mr Wright said: "We had npower in front of us about a month ago, who said they were going to try and engage with customers, and 48 hours later they hike up their bills by 9.8%, so the notion that that is in the past ... we've seen for ourselves, vividly, how that is simply not the case.

"How are your members really going to change?"

Mr Wright went on to list the proportion of customers who remained on the most expensive SVT's among the big six suppliers, citing 74% at British Gas, 56% at EDF, 73% at E.On, 59% at npower, 50% at Scottish Power and 91% at SSE.

He added: "That's still the case. That's not in the past, That's now."

Mr Slade replied: "I do expect to see those numbers going down. And if a company isn't looking into how it's managing its customer loyalty they can expect to be challenged by other entrants.

"If you are complacent, you will get caught."

Mr Wright also asked Ofgem chief executive Dermot Nolan: "If you have the power to cap SVTs and you choose not to, you're failing as a regulator for customers, aren't you?"

Mr Nolan replied: "On balance the CMA (Competition and Markets Authority) said not to. It was a finely balanced choice but there are pros and cons to all forms of price caps. We didn't choose to second guess the CMA's report.

"We're also conscious of the idea that if there is a desire for a policy shift on this, which would be a fundamental change for a regulator which has been set up to achieve these kinds of things through competition, then that's very much a matter for government.

"And if government does choose to go down that route then we will support it in every possible way."

The committee also queried whether Ofgem had adequate powers to intervene in response to price increases it saw as excessive.

Mr Nolan said: "The question is: will that price rise be potentially profitable? If, indeed, they raise their prices more than other companies and lose significant amounts of customers and the price rise is not profitable then I think there will be some evidence that the competitive market is working."

However Mr Wright said: "But that doesn't tend to happen. When we had npower before us they basically admitted to us that they rely on a good proportion - something like 55% - of their customer base are on standard variable tariffs which are the most expensive.

"They feel complacent in being able to put up their prices by an astonishing amount and thinking people won't switch.

"The market's not working for customers. What can Ofgem do to make sure that it does work?"

Mr Nolan said: "I agree that the market is not working effectively, certainly for all customers.

"That was the result of the CMA inquiry and there must be a situation where a company cannot raise prices and expect people to just stay with them."

But he added: "I should stress we do not have the power to tell npower or any company to change prices."