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Neil Clitheroe

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Competition and Markets Authority 14/07/2015

Last week, the Competition and Markets Authority (CMA) published its provisional findings after a comprehensive year-long investigation into the energy market. After months of questioning and analysis, it has dispelled the myths that wholesale energy markets and vertically integrated companies are not working in the interests of consumers. It also concluded that there is no tacit co-ordination between suppliers in relation to price announcements. The structure of the market is working.

However, the CMA did conclude that “widespread customer disengagement is preventing the market working properly”. With the average household currently spending about £1200 on energy each year, their report concluded that dual fuel customers could save an average of £160 a year by switching to a cheaper deal. Inevitably the headlines focus on the so called “Big 6” – but it is important to understand we’re all not the same.

The crux of this argument is “how many customers are on standard priced tariffs as opposed to fixed priced tariffs?”. The CMA gives an average of 70% of the market. But this is not ScottishPower’s average. In the last 2 years, more than half of our cash and direct debit customers benefitted from competitive fixed priced deals. As we speak today, including prepayment customers, 55% of our customers are on a standard product and 45% are on fixed priced products. Alongside one other company, these percentages are the ‘best of the Bigger companies’.

We are playing our part in a competitive market but we also firmly believe that more needs to be done to improve competition so the retail market works better for all customers. Every effort should be made to ensure customers have the information they need to shop around easily for the best deal for them and can then switch as smoothly as possible.

We have long argued the importance of competition and allowing customers more choice. Back in October 2012, I publicly described the then proposals to simplify tariffs (commonly referred to as the “4 tariff rule”) as taking “potential risks with competition”. It is interesting that the CMA now takes the same view and I look forward to working with the CMA to simplify regulation for the benefit of all customers across the country.

We’re embracing competition and are gearing up accordingly, including investing £200 million in a new IT system to improve our service offering – already allowing us to extend our call centre opening times to some of the longest in the industry. We’ve made sure we continually offer competitive products and have made it as easy as possible for our customers to deal with us. We’re encouraging existing customers to move between our tariffs and payment methods – making it hassle free, with no termination fees – because we know that if we don’t actively try to keep our customers on the best tariffs for their circumstances, they could end up leaving us. Last year, almost 2 million of our 5.2 million customers changed the tariff they are on with us.

Our online service is now one of the best in the industry so meter reads can be entered, energy accounts viewed, energy consumptions tracked and direct debit amounts adjusted. Of course there’s more we can do, especially with our new IT system starting to bear fruit, but we’re pleased with the progress we’ve made so far. For those people that are not our customers but are shopping around for a good deal, we’ve also made it as easy as possible to get a quote from us – simply answer 3 questions on our website.

The more competition in the market, the better we will become and the more households and businesses across the country will ultimately benefit.

Neil