The UK’s energy system will need to undergo significant changes in the next few years in order to deliver secure, clean and affordable energy in future. The Committee’s recent inquiry, Consumer Engagement with Energy Markets found that public trust in energy companies was low and there was a clear sense of a lack of transparency around energy company prices and profits.
If changes in the energy system are to be successful, the Government and energy companies will need to strengthen public confidence and trust in their ability to deliver a fair deal to consumers and protect the most vulnerable, fuel-poor households.
Fuel poverty is projected to hit 3.9m households in 2012[1] as rising energy prices put increasing pressure on low income consumers, often compounded by extra charges which penalise those who are struggling most. This inquiry aims to investigate through an analysis of energy prices, energy company profits and fuel poverty what is being done to ensure consumer protection and fairness in the energy market.
Terms of Reference
The overarching aim is to examine whether or not energy companies are offering consumers a fair deal. Given the wide-ranging scope of this inquiry the Committee will look at prices, profits and poverty in the separated but related terms of reference. We would like to emphasise that respondents should not feel obliged address every question and that the Committee welcomes responses which respond to a part of the terms of reference.
The Committee invites responses addressing some or all of the following questions:
Prices
- What factors determine energy prices (wholesale prices, company operating costs, green levies, company profits etc)? What contribution do these factors currently make towards a typical household energy bill and how might this change over time?
- To what extent (if at all) should the Government or the regulator intervene in the market to affect the prices consumers (or certain groups of consumers) pay for their energy? Should any changes be made to the Government’s current approach?
- How effective is Ofgem in ensuring consumers get a fair deal? Are there any areas for improvement?
- Could it be possible to benchmark energy prices to provide greater certainty about whether consumers are getting a fair deal? If so, how might this be achieved in practice?
- Could any other measures be put in place to ensure consumers are paying fair prices for energy and to provide consumers with greater confidence in this?
Profits
- Many consumers believe that energy company profits are the reason the energy bills have been going up in recent years. Is this perception fair?
- Why is there so much uncertainty about the level of profits the large, vertically integrated energy companies are making? What could be done to improve clarity?
- How useful are Ofgem’s electricity and gas supply market indicators in monitoring the level of profits made by energy companies? Could they be improved?
- How useful are the segmental generation and supply statements that major energy suppliers are required to produce in understanding where companies are making their profits?
- Do Ofgem’s supply market indicators and the segmental reports provided by energy suppliers help to increase transparency and public trust in energy companies? Could they be improved to provide greater transparency?
- To what extent does the way energy companies communicate profits to the general public influence the public’s perception of these companies?
Fuel poverty
- Is the Government on track to meet its target of eliminating fuel poverty by 2016 and will reduced Government spending in this area affect their ability to achieve this target?
- Has the Hills Review resulted in any changes to fuel poverty policy? How could its findings be used to improve the efficacy of fuel poverty policy?
- To what extent are current fuel poverty policies reaching the right people? Are there any particular groups that are currently not getting the necessary support? And will this change under the move to ECO?
- What support is available for fuel poor households living in solid-wall and hard-to-treat properties? Could this be improved?
- Will the Government’s proposals to ensure that consumers are on the cheapest tariff have any impact on fuel poverty?
- To what extent do fuel-poor households engage in switching? What are the barriers to greater levels of switching from these groups?
- To what extent do fuel-poor households current take advantage of energy efficiency schemes? Could anything be done to increase uptake?
The deadline for the submission of written evidence is 14 February 2013.
Notes on submission of written evidence
As part of a scheme to encourage paperless working and maximise efficiency, the Committee is piloting a new web portal for online submission of written evidence. Written submissions for this inquiry should therefore be sent via the link at the top of this page.
The deadline is Thursday 14 February 2013. As a guideline submissions should be no longer than 3000 words, please contact the Committee staff if you wish to discuss this. If you need to send hard copy please send it to: The Clerk, Energy and Climate Change Committee, 7 Millbank, London, SW1P 3JA.
Submissions should be a Word document, in the format of a self-contained memorandum. Paragraphs should be numbered for ease of reference, and the document should, if possible, include an executive summary.
Submissions should be original work, not previously published or circulated elsewhere. Once submitted, your submission becomes the property of the Committee and no public use should be made of it unless you have first obtained permission from the Clerk of the Committee. Please bear in mind that Committees are not able to investigate individual cases.
The Committee normally, though not always, chooses to publish the written evidence it receives, either by printing the evidence, publishing it on the internet or by making it publicly available through the Parliamentary Archives. If there is any information you believe to be sensitive you should highlight it and explain what harm you believe would result from its disclosure; the Committee will take this into account in deciding whether to publish or further disclose the evidence.
You should be aware that there may be circumstances in which the House of Commons will be required to communicate information to third parties on request, in order to comply with its obligations under the Freedom of Information Act 2000.
Image: iStockphoto