CMA sets out recommendations for energy market reform

11 Mar 2016 11:45 AM

The Competitions and Markets Authority (CMA) has yesterday set out proposals to reform the energy market, open up competition and help customers get a better deal.

In its summary of provisional decisions on remedies published yesterday the CMA outlines a comprehensive and wide-ranging set of actions that seek to address the problems hindering competition.

The proposals include a range of measures aimed directly at domestic and microbusinesses customers and call for a reset in the relationship between Ofgem, the Department of Energy and Climate Change and industry, so that decisions are made efficiently, on the basis of readily available accurate information, with the impact on consumers clearly set out.

The main measures proposed include:

• Giving more data, such as customer meter numbers, to price comparison websites (PCWs) and other intermediaries, and allowing them to negotiate exclusive deals with suppliers. In return, PCWs must be transparent about how they cover the market.
• An Ofgem-controlled database which will allow rival suppliers to contact domestic and microbusiness customers who have been stuck on their supplier’s default tariff for 3 years or more with better deals.
• A transitional price control for the 4 million households who are on prepayment meters pending the full rollout of smart meters and wider reform of the market by 2020. It claims the measure will save PPM customers £300m a year.
• Measures to help new suppliers compete for PPM customers and reduce barriers such as personal debt issues that make it difficult for such customers to switch.
• A requirement that the approximately 700,000 households on non-Economy 7 restricted meters are allowed to switch to cheaper single-rate tariffs without requiring a meter replacement.
• A range of measures to help microbusinesses.
• Ensuring the transparency of green subsidies that go on the customer’s bill and assessing their impact beforehand, with a clear rationale for the allocation of funding to different technologies.
• Reforms to the electricity and gas settlement processes to lower costs to consumers by enabling more accurate measurement of consumption and more efficient supply. Enabling the full benefit of smart meters to be realised. The Smart Energy Code currently prohibits suppliers from collecting consumption data with greater than daily granularity unless a customer has given explicit consent to do so. the CMA believes this opt-in clause is a major barrier to the development of static and dynamic time-of-use tariffs. 
• Introducing a locational pricing system for transmission losses incurred when transporting electricity to reduce the overall cost to customers.These proposals follow the provisional findings published in July 2015 and addendum published in December which highlighted a range of problems hindering competition in the energy markets, including the extent to which customers are disengaged and shortcomings in regulation and the ability to deliver change across the sector.

 The full text of the provisional decision will be published next week.

The CMA will now consult on its provisional decision before publishing its final report in June 2016. Submissions in response to the provisional decision on remedies are invited in writing by 7 April 2016 by email to energymarket@cma.gsi.gov.uk