End the big six’s predatory pricing practices and new entrants to the market will create real competition that drives down prices
When my wife and I set up the energy company Ovo in 2009, we were looking for a challenge – a market that was tough to get into but not impossible and where a company trying to do things differently could make a real impact. I can’t say we anticipated everything that has happened since, but our approach to business hasn’t changed. If we can’t explain something to a customer in a way they will understand, and trust that we are giving them a fair deal, we just don’t do it.
The principles we founded the company on are the same as I applied at Tuesday’s parliamentary select committee on energy prices: simplicity, transparency, honesty and fairness. Even knowing the way most people feel about energy companies these days, I am still bowled over by the difference this approach seems to have made.
Pinpointing what is wrong with the UK energy market isn’t easy and it has been made a lot harder by vast amounts of complicated and confusing evidence put out there to the contrary. But the fact is consumers don’t need to wade through piles of confusing data to know something doesn’t add up. People can feel instinctively when they’re getting a bad deal.
The facts that I outlined to MPs this week are simple though. The big six didn’t win their massive customer bases through competition and running great businesses; they inherited them pre-privatisation. They each rely on the vast majority of their customers never switching, which allows them to operate inefficiently, charging some customers much more than others and offering cut-price deals to attract the ones who do switch. Most importantly, and simplest of all: wholesale prices aren’t rising. So whatever reason you are being given for your bills going up, this clearly isn’t it.
I’m not expecting to have made any new friends in the big six after Tuesday’s hearing. I knew beforehand that, as a small energy supplier, we were in a strong position to challenge the status quo and I think it is important that the voice of the independent energy suppliers is heard, even if it is not popular with some of my peers in the industry. But this debate around energy prices has its roots in a genuine and serious social problem that, as well as getting ripped off, people are choosing between feeding their families and keeping warm which we just can’t sit back and let happen. I for one believe change is possible, but the time has come to move beyond the blame game and take some action.
So what can be done? With more competition, British consumers would be paying less. The more independent companies there are out there to choose from, the more efficient the big six have to be to win and keep your business. Ultimately though, as long as they can predatory price – offering new customers, or those threatening to leave them, significantly better prices than customers that have been loyal to them for years – newer entrants won’t be able to compete.
In a proper market, with real competition, this practice would end. Very simply, suppliers would be prevented from charging either a lot more or a lot less than the actual cost of energy they supply. Customers would know whether they’re getting a good deal or not. Small suppliers would spring up and force the incumbents to become more efficient. We can do that – and the effect would be enormous, almost overnight.
If Tuesday’s committee hearing showed anything, it is that among all the confusion and complexity of the energy prices debate, one positive outcome is starting to come through: a belief that we can challenge the accepted status quo where customers have an alternative choice. Energy prices are front page news and will stay there until customers feel they are finally getting a fair deal. It’s up to politicians and the regulator to be bold now and to see that this happens.
Link to article: feeds.theguardian.com/c/34708/f/663889/s/3322704f/sc/4/l/0L0Stheguardian0N0Ccommentisfree0C20A130Coct0C310Cenergy0Ebills0Edeals0Ebig0Esix0Epricing0Ecompetition/story01.htm