Monday, 22 October 2012

Tariffs row shows UK's energy market is broken


It was an extraordinary statement. A Conservative prime minister declares that (a) competition and markets fail and (b) state intervention is necessary to regulate prices. Thank you, David Cameron for telling the truth about the UK's energy market, even if it was a slip up. Just as extraordinary was the political chaos the next day, the backlash from the industry and the desperate atttempts to "clarify" the policy.

But the truth is that Britain's energy market is broken – and Labour is just as guilty for not taking on the energy cartels. Switching benefits those prepared to put in the legwork but at the cost of other consumers left on dud tariffs. The idea of making the big six give consumers their lowest tariff is not so daft: yes, the cartel might withdraw its cheap tariffs and leave us on their single, pricey one. But that will at least smoke them out, and allow new operators to offer simple, cheaper tariffs. We may also see the end of the "bait-and-switch" tactics beloved of the energy firms, where they lure you in then push the price up when you're not looking.

As we report this week, Ovo Energy is making headway but it is up against a cartel that uses the profits from customers on dud tariffs to subsidise cheaper tariffs for switchers. It's a "market" rigged against new entrants from the start. The mobile phone industry operates a depressingly similar model. I love that the best deals from the big providers are currently "Online Fixed Price Energy April 2014 Dual Fuel" followed by "Blue + Price Promise May 2014." Is this real competition or just confusion marketing?

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