Market 'failed' to lower energy prices

Thursday, 13 November 2008 9:00 AM

The market has failed to bring down energy prices since price controls were removed from the industry, MPs have said.

The public accounts committee found price controls on energy, telecoms, and business postal services may be necessary to protect and benefit all consumers.

Regulators previously removed price controls because they judged their respective industries to be sufficiently developed to ensure consumer protection.

As it turns out, competition is weaker than anticipated - largely because it is not so easy to switch between suppliers, and it is unclear who offers the best deal.

"It is the poorer and older citizens who are least able and yet would benefit most from switching to a cheaper supplier," committee chairman Edward Leigh said.

"They have been exposed to huge increases in gas and electricity prices, far greater than in many other countries."

The report examined the decision to remove price controls by regulators of these industries - Postcomm, Ofgem, and Ofcom - between 2002 and 2006.

"In practice, the removal of price controls from energy, telecoms and business postal services has failed to generate the expected market pressures to the benefit of all consumers," Mr Leigh added.

The report discovered that a large percentage of energy consumers, for example, paid more money when they switched supplier in an attempt to get a better deal.

"Consumers simply do not have the kind of good quality information needed to get the best deals on price and service," Mr Leigh continued.

"It is very telling that, according to an NAO survey, a quarter of electricity consumers who had switched supplier ended up paying higher prices," Mr Leigh added.

Tags:
• economic policy
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• economy
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• energy