Use teeth on energy Big Six, MPs urge watchdog

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Trust in the energy market is being undermined by lack of transparency about profits being made by companies, a new report said.

Energy regulator Ofgem was also criticised by MPs on the Energy and Climate Change Committee for not taking enough action to tackle the problem and restore consumer confidence.

Ofgem was urged to “use its teeth” more often and force energy firms to show they are “squeaky clean”, one MP on the committee said.

The report made a series of recommendations, including making energy bills easier to understand and for prices to be compared with those of other companies.

There were “serious shortfalls” in the way energy companies communicated with customers, although improvements have been made, said the report.

Poor communication on why energy prices have gone up has resulted in “deep mistrust” from customers, said the committee, adding that the small number of people switching suppliers suggested the market was not as competitive as it could be.

Speaking on behalf of the committee, Liberal Democrat MP Sir Robert Smith said: “At a time when many people are struggling with the rising costs of energy, consumers need reassurance that the profits being made by the Big Six are not excessive.

“Unfortunately, the complex vertically integrated structure of these companies means that working out exactly how their profits are made requires forensic accountants.

“Ofgem should shine a brighter light on the internal structure of these big companies.”

The report also reprimanded the Government for not doing enough to help the millions of low-income families living in poorly insulated homes, struggling in “fuel poverty”.

“Spending on the problem has been cut in England and some of the Government’s fuel poverty programmes appear to be in “hiatus”, it was reported.

The MPs argued that to help protect the most vulnerable, more programmes should be funded through direct taxation rather than levies.

Fuel poverty charity NEA welcomed the report, saying current measures to address the level and depth of fuel poverty did not constitute an “ambitious strategy”.

Which? executive director Richard Lloyd said: “The Government and regulator must do more to rebuild trust in the suppliers and to keep prices in check.”

Ofgem’s senior partner for markets, Rachel Fletcher, said: “We agree with the committee that suppliers have been poor at communicating with their customers. That is why Ofgem has taken the lead in pursuing transparency across all sections of the energy market.

“Ofgem has made energy companies produce yearly financial statements, which have been reviewed twice by independent accountants and found to be fit for purpose.”

Energy and Climate Change Secretary Edward Davey said: “We are doing all we can to help consumers keep their energy bills down and reduce the number of people in fuel poverty.

“We are using the Energy Bill to ensure that all households will be able get the best deal for their gas and electricity as soon as possible. This means getting people off poor-value dead tariffs, cutting the number of tariffs and giving consumers clear personalised information on their bills so they can compare and switch supplier.

Shadow Energy and Climate Change Secretary Caroline Flint said: “This report is yet more evidence that Britain’s energy market is not working in the public interest and that Ofgem is failing consumers.

“Time after time Ofgem has ducked the opportunity to get tough with the big energy giants. That is why Labour have said we would abolish Ofgem and create a tough new watchdog with powers to force energy companies to pass on price cuts and clamp down on abuses by the energy giants.”