Energy secretary Chris Huhne has announced a reform of the energy market to provide a better deal for consumers.
Speaking at the annual Liberal Democrat Conference in Birmingham, Huhne promised to “get tough” with the big six energy firms which dominate the UK’s gas and electricity market.
Huhne attacked what he called “predatory pricing” by the big six energy firms - Scottish Power, British Gas, Scottish and Southern Energy, E.ON, npower and EDF.
He called on energy regulator Ofgem to assess whether market competition is being stifled by energy companies charging existing customers high prices, but offering cut-price deals online and to new customers.
Huhne said this made it difficult for smaller suppliers to compete and creates an unfair price market.
Simpler switching pledge
"It's not fair that big energy companies can push their prices up for the vast majority of their consumers, who do not switch, while introducing cut-throat offers for new customers that stop small firms entering the market," he said.
"That looks to me like predatory pricing. It must and will stop."
All of the big six firms have announced price hikes for customers of up to 19 per cent for gas and 16 per cent for electricity in recent weeks, affecting 27.7 million households and adding £160 to household bills on average.
In his speech, Huhne cited Ofgem’s research that suggests the average household could save £200 by switching to the lowest cost supplier - but fewer than one in seven households do so.
Huhne announced that energy firms will be obliged to speed up the switching process, which currently takes between six to eight weeks.
Consumer checklist
They will now also be required to provide customers with a ‘Consumer Checklist,’ explaining their rights and what they service they should expect from their supplier.
Huhne outlined plans to stop energy companies blocking action by Ofgem, something that they are currently able to do by seeking a second opinion from the Competition Commission, a process which can take up to a year.
These three changes are due to come into force by the end of the year, subject to parliamentary approval.
‘Bad behaviour’ refund for customers
Huhne said the energy firms had already agreed “in principle” to tell customers whether they can save money by switching to a cheaper tariff.
Huhne also said the government is considering whether Ofgem should be given new powers to force companies to give money back to customers for "bad behaviour".
The Department of Energy and Climate Change said: “Redress would include refunding customers directly or requiring the company to pay into funds that benefit consumers.”
Huhne also mentioned additional help for those experiencing fuel poverty, the importance of thinking green and the impact of the coalition government’s low carbon policies.
More choice, better deals
Lisa Greenfield, energy analyst at Confused.com, said: "It's encouraging to hear Chris Huhne is cutting down on unfair energy pricing and giving Ofgem more clout.
“Consumers have lost faith in the benefits of switching and the industry as whole, so anything the energy secretary can do to instill confidence will be welcomed.
"The market is in dire need of simplification and these changes will be music to the ears of savvy consumers.
"The plans will also help smaller providers step into the market which is great news as it can help offer more choice and ultimately better deals for consumers."
We breakdown this year's energy price rises and the companies responsible in our new infographic.
