Our founder, Greg Jackson, joined BBC Radio 4’s At present program to debate John Penrose MP’s proposals for a relative value cap.
Greg and Richard Neudegg (USwitch) mentioned the proposed value cap, limiting the distinction between a provider’s least expensive accessible deal and its Normal Variable Tariff (SVT) with Mishal Husain.
You may learn why we assist the worth cap in our current weblog. In brief, we consider that prospects have for too lengthy been ripped off by Huge Six “tease and squeeze” pricing, and the repeated calls to change yearly have not solved the issue. A value cap would pressure these suppliers to deal with their loyal prospects pretty, or danger dropping enterprise to suppliers who worth transparency and honesty above profiteering.
You may hearken to this system right here (the dialogue begins round 34 minutes in). For solutions to a number of the most pertinent questions raised within the dialogue, and of the worth cap proposal, please learn beneath.
Would not a relative value cap simply result in the Huge 6 holding their Normal Tariffs (SVTs) excessive?
Not for lengthy. These firms are naturally dropping prospects to the brand new entrants out there. So in the event that they’re dropping prospects, however cannot win any new ones, it isn’t viable for lengthy. They’d face calls for from shareholders to chop their prices and to start out successful new prospects.
And that is why a relative value cap is such a good suggestion for everybody.
Why is there any distinction in any respect between Octopus’s SVT and its fastened tariff?
The distinction is barely about £15 – and generally the distinction is unfavourable (this compares to the Huge Six the place it may be near £300!).
In our case, the distinction comes about as a result of we range our SVT occasionally to mirror wholesale costs, whereas our fastened costs will probably be fastened based mostly on the place wholesale markets are for as much as a 12 months forward. Meaning there’s at all times going to be some distinction.
The important thing factor is that the Huge Six set their SVT excessive to allow them to subsidise their inefficient companies, subsidise loss-making “teaser” tariffs, and increase their income.
Would a relative value cap cut back the inducement to change?
By no means! With 45 or so suppliers competing for your online business, a buyer on a typical excessive SVT might nonetheless save as much as £300 by switching to an environment friendly new provider – however they would not get ripped off on the finish of it.
Should not we give the CMA time to take impact?
The CMA (Competitors and Markets Authority) mainly depends upon the identical failed concept of accelerating switching that has solely led to this terrible place the place most households are getting ripped off. After 20 years of a aggressive market, 66% of households are nonetheless paying far an excessive amount of for his or her power. It is time to finish this.
The relative value cap will give prospects the selection to remain the place they’re with out worry of being exploited, and take away the necessity to hunt yearly for a good value. It may very well be a step in direction of lowering the variety of tariffs in the marketplace, making shopping for power even easier for purchasers. Introducing a equity mechanism into the UK power market is lengthy overdue and advantages everybody – from those that purchase power to the suppliers who’re pressured to enhance their efficiencies to compete.
