UK regulators recommend lifting remaining price controls on gas and electricity

By the OGJ Online Staff

HOUSTON, Nov. 26, 2001 – UK’s electricity regulator Monday said the market has become competitive enough to lift all remaining price controls on domestic electricity and gas supplies.

The Office of the Gas and Electricity Markets (Ofgem) reported findings from the latest research into competition in the domestic gas and electricity markets supported its view competition has developed enough to lift price controls, while still ensuring customers are protected and continue to receive real benefits.

Comments are due in February on the Ofgem proposal.

Some 38% of electricity customers and 37% of gas customers have switched supplier and continue to do so at a rate of 100,000 electricity customers and 67,000 gas customers a week, Ofgem said. More than 70% of all gas customers and 50% of all electricity customers are now on tariffs which are not price controlled.

This is a higher rate than for any other deregulated utility, regulators reported.

Ofgem CEO Callum McCarthy said the focus of Ofgem’s work going forward will increasingly be on monitoring competition and using deregulation law to tackle market abuse, pursuing a range of measures aimed at helping vulnerable customers, and continuing work with other organizations to make it easier for customers to choose and change supplier.

“This decision heralds the future of regulation for these markets. As the markets have become more and more competitive, there has been less justification for price controls, he said.

Ofgem annually conducts market research. Highlights from this year’s findings include:

– Customers are switching suppliers across all income groups, with low income groups switching at a higher rate than the national average.

– Around 100,000 electricity customers switch each week, with about 67,000 customers changing their gas supplier each week.

– Companies are increasingly targeting customers on prepayment meters, and these customers are switching at as high a rate as other quarterly credit customers.

Under Monday’s proposals, Ofgem said it will continue to protect customers by monitoring domestic markets to ensure competition is working effectively. The agency warned it will take action against any company abusing its position using powers under the Competition Act.

Ofgem will also pursue a range of measures under the Social Action Plan to help customers in poverty, and is working with energy watch and the industry to ensure that choosing and changing suppliers is a simple experience.

Older people are not switching as much as other age groups – around 30% compared to about 38% on average. Ofgem said it will work with organizations to raise awareness among older people of the savings that can be made by switching.

Gordon Lishman, director general, Age Concern England, said: “Older people are among the most reluctant to switch utility suppliers, yet many on low incomes could benefit from a better value deal by doing so. We look forward to explaining with Ofgem how we can encourage more older people to shop around for the best deal for them.”

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