Competition Monitor
Competition Monitor
Monitoring impacts of liberalised gas and electricity markets on low-income households
This project, now completed, monitored the impact of newly liberalised gas and electricity markets on a national panel of low-income households for two years. The research objectives included three things:
- To provide information, based on the research findings, on how energy competition affected low-income households and in particular whether they benefited from competition to the same extent as more affluent households
- To disseminate the findings as widely as possible, particularly to key players within competitive markets
- To use the findings to influence the policies of Government, Ofgem, consumer bodies and fuel companies to help make sure that low-income households benefited from competitive markets
CSE and NRFC established a national panel of 300 low-income households. The panel was interviewed regularly over the two years to assess their experiences of gas and electricity competition and related issues. The questionnaires covered such issues as:
- marketing practices
- information provided by suppliers
- payment methods, including access to payment outlets
- priority Service Registers
- energy advice
- payment methods for related services, e.g. water, rent, telephones
- financial exclusion and social exclusion in general
- interest in innovations/pilots for new services, e.g. credit unions, ESCOs, fixed weekly payments through prepayment meters
The research was advised by an advisory group of representatives from DTI, Ofgem, consumer bodies, local government and UNISON. Six quarterly bulletins were also published that gave information about the latest findings from the research and topical news about developments in competitive markets of relevance to low-income households.
The findings were published in two reports. The interim report, published in September 1999 and called 'Gas and Electricity Competition - Who Benefits?', concluded that competition was exacerbating existing inequalities in access to energy. For example:
- prepayment meter and frequent cash payment consumers were losing out - they did not get the cheaper prices on offer to Direct Debit payers
- most people on low incomes were not well informed about competitive markets
- access to bank accounts, bill payment methods and house conditions were important influences on householders' access to competitive energy markets
- major improvements were needed to energy advice, special services to older and disabled consumers, and the treatment of people with payment difficulties - all important duties of energy suppliers
The final report, called 'Competitive Energy Markets and Low Income Consumers', was launched in the House of Commons in March 2001. The report concluded that:
- many low-income consumers were benefiting from the lower prices and innovative services on offer in competitive markets
- however, many other low-income consumers were left behind - their needs for flexible or prepay payment methods, energy efficiency investment or special services often went unmet
- 'dual fuel' deals dominated the energy market (buying gas and electricity from one supplier) - 43% of the panel members had 'switched' to 'dual fuel'
- however, the dual fuel market was even more distorted than single fuel markets - very few prepayment meter consumers bought dual fuel
- low-income consumers, particularly prepayment meter consumers, were very interested in a reformed Fuel Direct scheme if it included discounted tariffs
- many people on low incomes were very concerned about the Government's plans to introduce automatic transfer of benefits to bank accounts. This was seen as undermining Post Offices, which were valued for their social role and the convenience of paying fuel bills while using other Post Office services
- fuel poverty and social exclusion were particularly important factors in explaining differential access to competitive markets
The report welcomed certain provisions within the Utilities Act 2000, the Government's draft Fuel Poverty Strategy, Ofgem's Social Action Plan and new supplier initiatives targeted at low-income consumers. However, the report felt it was too early to state whether these developments would overcome the regressive elements within competitive markets revealed by the research. The report argued for improved provision for low-income consumers and included recommendations for improving their access to energy markets.
Copies of 'Gas and Electricity Competition - Who Benefits?' are no longer available. Copies of 'Competitive Energy Markets and Low Income Consumers', are available here.