Robert Halfon is a member of the 1922 Committee Executive and MP for Harlow.
As we approach March, many of us will be thinking about tightening our belts with the knowledge that, in the next few weeks, our winter energy bills will be landing on our doormats. The latest rise in energy bills made headlines across the UK – and it is clear to see why. Since 2007, gas bills have gone up by 43 per cent, at a time when wages have barely risen. It is no wonder that many families are feeling the pinch.
To the Government’s credit, they have taken a number of important steps to help ease the pressure such as forcing companies to put customers on the lowest possible tariff, providing a rebate to every domestic electricity customer, and reducing bills by £130 for 2 million of the poorest households.
I wish I could support Labour’s energy price freeze, but unfortunately I cannot. Whilst it is a romantic and noble thing to argue for, it is not practical or possible. Just like energy, the price of bread has risen 71 per cent in real terms over the past 10 years, but no-one is suggesting that we freeze the price of bread.
I have previously written about how some companies are ripping consumers off by charging extortionate amounts to the 45 per cent of people who do not pay their energy bills via direct debit. In some cases, it can be as much as £390 per year. This is a charge that particularly hits the poor and vulnerable, and I recently held a Backbench Business Debate on it, which secured the most support for a backbench motion ever. I have also introduced a 10 Minute Rule Bill on it, and last week I was pleased that First Utility, Britain’s 7th biggest energy firm, dropped their charges from £96 to £24 a year following my recommendation in a report I wrote. You can read more about my campaign here.
But it is not just those who do not pay their bills by direct debit who are getting a poor service. Last week, Which? released research that revealed that energy companies received more than five million complaints from consumers in 2013 alone. This is indicative of a market in poor health, if not downright broken.
Just as there are many ways in which the market isn’t working for consumers, there are a number of ways to fix it. The ongoing energy market assessment, being carried out by Ofgem, the Office of Fair Trading and the Competition and Markets Authority is a welcome development. However, just as I have argued for a full inquiry into the fuel market to see if we’re being charged a fair price for petrol, it is now time for one in the energy sector.
Six big companies controlling 97 per cent of the market, including being able to both generate energy and sell electricity to themselves, is not a situation that lends itself to proper competition. If those companies were required to have separate licenses for the different parts of the businesses it would shine a light in some of the murky areas which have in part led to a complete collapse in consumer trust in the industry. Just one in five people trust their gas and electricity to act in their best interests, while eight in ten are worried about rising energy prices.
While there are these structural changes that need to be made to the energy market in order for it to function more effectively for the consumer, it’s also time for a cultural change in energy companies. Ending practices like charging hefty fees for those who use payment methods other than direct debit, and resolving to improve the disastrously low customer satisfaction ratings in the sector are just the start. Tariffs and prices should be much simpler, and switching – a process which can currently take weeks – can and should be done inside a week as soon as possible.
The debate around energy prices is going to run and run. Bills have increased dramatically in the last five years and since we don’t really have a choice over whether we engage with the energy market or not, isn’t it only fair that a proper investigation into competition is made?