Can David Cameron’s energy plan really work?

Cameron - bigmouth strikes again
"Consumers are understandably angry with incessant rises in energy costs but the PM’s hasty proposal will not solve apathy and disengagement in the energy market"
  • | by Kristian Dando

The Prime Minister took the energy industry - not to mention the cabinet - quite by surprise this week by announcing that he'd be making energy companies put customers on to their cheapest tarrifs.

Say what you like about Cameron - and many certainly do - he's certainly never one to miss a trick, what with the country being in uproar over the latest round of energy price rises.

Depending on your standpoint, it’s a long overdue taking to task of an out-of-control energy sector, or a haphazard piece of policymaking on the fly. Funnily enough, that’s the view of the opposition.

Cameron certainly took energy secretary Ed Davey off guard– the Liberal Democrat MP today announced a completely different way of reducing costs for consumers. He claimed that prices would come down because of increased competition in the market, with suppliers giving incentives to boost supply levels.

We’ve now been promised an announcement next month which will address the energy sector – but the government hasn’t confirmed or denied the PM’s plan will become law, and one by one, cabinet ministers are beginning to distance themselves from the pledge. It all seems a bid of a muddle.

Given the confusion over the policy, we’re still very much operating in the realms of the hypothetical as to whether or not these plans will go ahead. But if they were to pass into the statute book, would they actually work?

The end of choice in the energy marketplace?

Mark Greening, head of energy at reckons that one of the mooted knock-on effects of Cameron’s plan would be diminished choice in the market. “Forcing energy companies to put their customers onto the cheapest tariff could result in the killing off of competition as suppliers could end up only offering one tariff for all. It could also fail to protect consumers from higher bills:,” he says. "Consumers could be left with little choice and energy companies could be left with even less reason to engage with consumers.”

But is competition any good, anyway? When Britain’s energy industry was privatised during the 1980s, the argument was that greater choice in the marketplace would drive down costs and give a better deal for consumers.

Of course, fluctuations in energy prices caused by dwindling resources, demand from emerging economies, compulsory and expensive investment in renewables and other geopolitical occurrences certainly haven’t helped gas and electricity get cheaper.

Neither, for that matter, has the tight control (a stranglehold, some might say) over the energy market by the so-called ‘big six’, and a failure by past governments to keep them in check.

But unstoppable price rises and poor customer satisfaction mean that energy competition is all too frequently difficult to defend.

The wrong sort of competition?

But rather than competition itself being bad, it seems to be that consumers have been faced with rather too much of it. Ofgem, the energy industry watchdog, has frequently criticised the sheer range of energy tariffs on offer from the larger companies as being prohibitive to consumers finding a better deal.

It certainly seems that consumers are a bit put off by it all. In a recent poll conducted by, 36% of people said they’d never switched energy supplier as it’s too much hassle.

As with most financial services products, being proactive and informed with your choices could stand to save you a lot of money. customers could save as much as £350.95* per year on their utilities by switching supplier – that’s not a figure to be sniffed at. It’s also much easier than you think.

Besides, there aren’t many better ways (legally, of course) to send a message to your energy supplier than by going elsewhere.

The verdict

We’ve all said things in the heat of the moment that we don’t actually mean. And the head-scratching that has ensued in the wake of David Cameron’s outburst suggests that the plan for energy companies to put all consumers on their ‘cheapest’ tariff will probably not feature in next month’s big announcement at all.

In fact, the PM’s demand to put all consumers on the ‘cheapest’ tariff seems a little naïve – what might be cheaper for one consumer might end up being far more expensive for another, depending on their usage.

Consumers are understandably angry with incessant rises in energy costs but the PM’s hasty proposal will not solve apathy and disengagement in the energy market. In fact, it may simply exacerbate the problem. Addressing this is possibly the only way we will see a fairer and more transparent energy market.

* Based on customers who switched energy supplier for both gas and electricity (dual fuel) using the Energylinx powered platforms during the 1st January - 31st March 2012. At least 10% of people who switched energy supplier for both gas & electricity with saved £350.95 or more.