MPs tell new UK Energy Minister that commission-only price comparison websites are ‘retrograde’ step

Big Six logo montageMPs on the House of Commons Energy Committee have bluntly warned Greg Clark, the new UK Business and Energy Minister that Competition Authority plans for ‘commission-based’ energy price comparison websites are a retrograde step.

They are ‘particularly alarmed’ at the authority’s proposal to let household gas and energy consumers offer only tariffs that pay energy price comparison websites a commission – rather than displaying ‘whole of market’ options which don’t generate income for them.

In a letter from the all-party Committee, Chairman Angus MacNeil, MP (SNP), said: Price Comparison Websites are now one of the main ways consumers switch supplier.  Consumers must be able to trust these websites to help them switch to the best energy deals available on the market.

“It would be a retrograde step to go back to a situation where websites conceal deals that do not earn them commission.”

After pressure from independent energy suppliers – the ‘minnows’ in comparison to the British Big Six – the market regulator OFGEM referred the energy market to the Competition Authority  for an investigation in order to ‘clear the air’ after public trust in the energy market collapsed in 2013-14.

Angus MacNeil, MP
Angus MacNeil, MP

MacNeil added: “That trust is gradually returning, as OFGEM’s latest survey of public attitudes to the energy market shows, but the Competition Authority’s commission-only energy price comparison websites ‘remedy’ risks turning that tide and eroding trust afresh.

“As well as undermining consumer trust in the switching process, we are concerned that this remedy could also have a detrimental effect on competition.

“The number of energy suppliers is currently rising, as new entrants join the market, and the market share of small and medium sized independent suppliers is increasing.

“Nearly two million people have switched this year and almost 30% of these have gone to small and medium sized suppliers. 

“And the share of electricity, gas and dual fuel supply taken by the Big Six has slipped to around 85%. These are positive trends.

“Small and medium sized suppliers help to push down prices and offer more choice to consumers. But, by definition, it is harder for smaller suppliers to afford to pay the same rates of commission as the Big Six suppliers.

“I understand that GB Energy supply, Co-operative energy, So Energy, Zog, Go Effortless Energy, Bulb, have already written to you to raise ‘profound concerns’ about the impact that this remedy will have on competition and consumer bills.  We share these concerns.

“It would be counter-productive and ironic, if the CMA investigation led to a remedy that inadvertently reinforced the dominance of the Big Six and made it harder for new entrants to reach potential customers.

“We urge you not to implement a recommendation that could undermine consumer trust and disadvantage new entrants.”

Meanwhile, SSE – the Perth-based Big Six utility giant – yesterday told shareholders that it has lost 50,000 retail gas and electricity energy consumers in the first quarter of its financial year. 

In contrast, Good Energy – the all-renewable energy supply ‘minnow’ – yesterday report a 36% leap up in its customer numbers over the past year.

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed