David Cameron 'should fix broken energy market', as hikes hit

Consumer group Which? is calling for an urgent, independent investigation into household energy bills and competition among suppliers.

Ahead of the winter, four of the big six energy firms have announced price rises. SSE's 9% average increase came into force on Monday, with British Gas, Npower and Scottish Power to follow over the coming weeks.

Power firms have come under fire for raising costs at the same time they are making bumper profits. Meanwhile, a report last week by the National Debtline charity found 16% of callers are struggling with energy arrears.

Which? points to an energy summit a year ago involving politicians, suppliers, the regulator and consumer groups including MoneySavingExpert.com. There, the Government said it was "making energy companies competitive".

But Which? says there has been little evidence of this, with 75% of consumers on the most expensive tariffs and the level of those switching to a cheap tariff continuing to decline.

Market broken

Which? executive director Richard Lloyd says in the letter: "It's time to face facts: the energy market is broken.

"The sector is dominated by a handful of big and powerful players who are seemingly unaffected by the normal competitive pressure of price and customer service.

"We are calling on you to launch an urgent, expert, independent review into rising costs and whether competition can work more effectively.

"The time for action is now. Warm words alone are not enough to keep consumers from the cold this winter."

Government response

However, the Government has rejected Which?'s call for an investigation into energy prices.

A spokesman for the Department of Energy and Climate Change says: "Households facing rising energy bills this winter aren't going to be helped by more inquiries or investigations that could take years to complete and implement.

"We know what the problems are, we want to get on with tackling them now. We're focusing on action, not more words.

"The fact is reforms by Government and Ofgem, including electricity market reform through the forthcoming Energy Bill and Ofgem's ongoing Retail Market Review, offer the quickest way to boost consumer confidence in the energy market."

Below is the full letter from Which? to David Cameron

Dear Prime Minister,

Today marks the anniversary of the Energy Summit you held that promised action to help people to keep their energy bills down.

One year on, and with winter fast approaching, more than 20 million households are facing inflation-busting price rises as four of the UK's largest energy companies put their prices up yet again.

With the average energy bill already rising 13% since last year, it is no wonder consumers tell us that energy prices are one of their top financial concerns.

After the Energy Summit, you said 'we are making energy companies be competitive' but there is little evidence of this. Seventy five per cent of consumers are on the most expensive tariffs and the level of switching continues to decline.

It's time to face facts: the energy market is broken.

People are questioning whether they are paying a fair price for their gas and electricity. The energy companies blame wholesale price increases but even the regulator has found that prices don't fall when the wholesale price drops. The sector is dominated by a handful of big and powerful players who are seemingly unaffected by the normal competitive pressure of price and customer service.

So they then also blame the cost of implementing your Government's environmental and social policies for the price rises. Yet, as your own Energy Department has said, there is no hard evidence to back this claim up.

Claim and counter claim are played out in the media but consumers deserve the truth.

Ofgem's proposals to change the retail energy market, expected shortly, are necessary but not enough.

So today we are calling on you to launch an urgent, expert, independent review into the rising cost of domestic energy bills and whether competition among energy suppliers can be made to work more effectively in the consumer interest.

We want an independent review to look at whether the reasons given for the recent price increases are justified.

We also believe a review must identify what reporting measures should be required of energy companies, relating to both the wholesale and retail markets and the costs of social and environmental policies, to increase transparency and give consumers confidence that everything possible is being done to keep energy prices in check.

The review must also consider whether the regulator should now be required to better protect the majority of consumers on expensive 'standard' tariffs by introducing a fair cap on 'standard' prices.

Until we see greater transparency and prices presented clearly, consumers will continue to distrust the energy market and remain unable to drive genuine competition through moving to the cheapest tariffs. 

The time for action is now. Warm words alone are not enough to keep consumers from the cold this winter.

Yours sincerely,

Richard Lloyd Executive Director Which?