What's still wrong with the energy market?

Theresa May's energy cap
Big T's got her energy cap on
"A price cap would pull the rug from under the switching revolution and cast the market back more than a decade"
  • | by Derri Dunn

Cast your mind back to 2014.

Brangelina had just got hitched, everyone was dousing themselves in vats of icy water and the Competitions and Markets Authority (CMA) was investigating the rot at the core of the UK energy industry - it was a different world back then.

But plus ca change plus c'est la meme chose.

Or at least when it comes to gas and electricity, it seems we're not yet in that elusive stage of switching utopia that we've realised for the likes of car insurance and home insurance.

So what's still going wrong and stopping you from getting a decent price on your heat and light? And what might help to fix it?

Price caps won't work

'Strong and stable' might already be Theresa May's overused mantra, but capping the price of domestic energy was her opening election gambit.

Capping prices certainly sounds like a vote-winner, but let's dig a little deeper into the implications, shall we?

If you're reading this, you're quite likely to be GoCompare-aware.

It's probable you're au fait with comparing to get the best insurance deals and you're well aware that it's a good idea to regularly shop around and switch to the best energy tariff too.

And aye, there's the rub - a price cap, while it might give some buffer to the less savvy consumer, could well do the likes of you more harm than good.

"The switching message is getting through to millions of households," extolled GoCompare's most senior energy buff, Tom Lewis.

"We need to maintain that momentum, encourage more households to take control of their energy bills and carry on switching.

"A price cap could result in some people getting a slightly better deal in the short term, but it could also reduce overall competition in the market in the long term and increase inertia among consumers," he warned.

"A price cap would pull the rug from under the switching revolution and cast the market back more than a decade."

So back to 2007, then - when we plunged into economic crisis and Britney Spears went rogue at the hairdressers.

It's a grim prediction.

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Some deals are too good to be true

The emergence of multiple smaller energy suppliers is important.

They help to disrupt the market, increase competition and break up the monopoly of the 'big six' that have dominated since privatisation began in 1990.

Small suppliers might be able to take a more bespoke approach to their customer services and the lower costs for marketing and administering their products can sometimes mean they can offer very competitive tariffs.

But smaller firms can also be less established, less experienced and could be unreliable because they lack the bulk-buy power that the big-hitters have on future wholesale energy prices.

GB Energy is case in point. The nascent supplier went spectacularly bust after offering customers fixed rates so cheap that it couldn't fulfil its obligations.

Basically, it bit off more than it could chew.

Energy regulator Ofgem charged to the rescue to switch customers to alternative suppliers - but they lost their cheap GB Energy fixed rate in the process, making a mockery of shopping around for the cheapest deal in the first place.

Ridiculously cheap headline deals that are all smoke and mirrors need to be eradicated if consumers are to have any sensible basis for comparison.

Free advertising is bad for business

GoCompare, like other comparison sites, is a money-making business.

Our business model involves providing a marketing space where providers can tout their wares, in return for paying us a commission when you buy.

It's all done at no cost to you.

The fly in the ointment with the energy market is that until September sites like ours were required to show all deals on the market, even the ones we don't earn money from.

Essentially, that was free advertising for some providers, giving them no incentive to compete on anything other than price - which can help to brew sustainability issues like those suffered by GB Energy in 2016.

So now, when you use our services, you'll first see the suppliers that we can help you to switch to - because we want you to find the best deal, but we also want to play our part in making the future of energy comparison sustainable and safe.

If you want, you can opt to see all deals as well and make your own decision on who to switch to, although we can't help you switch to the ones we don't earn commission from.

Zero-comission 'free advertising' on price comparison sites will encourage unsustainable and oversubscribed deals that aren't good for businesses or consumers and does nothing to foster the necessary competition for the future of the energy industry.

It's not 2014 anymore. Like Angelina, we've decided enough is enough and it's time to switch it up.

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