Ofgem has launched its annual State of the Energy Market report. The report gives a detailed assessment of how well the energy market is working for consumers in terms of competition, affordability, decarbonisation, and security of supply.
In the section dedicated to affordability Ofgem notes that even if suppliers provide energy at the lowest feasible prices, some consumers may find it hard to manage their bills. This can potentially leave customers with high bills, debts, or under-heated homes.
The affordability section examined the overall cost of energy bills, and identified which customers are struggling to pay them. Ofgem that found that there are two components of energy bills: the prices that customers pay per unit of energy, and the amount of energy they consume, including the impact of energy efficiency programmes. This includes:
- In 2016, the average dual fuel bill for a customer of the six largest suppliers was £1,123, 16% lower than its peak in 2013 in real terms. Households with the lowest incomes spend 10% of their expenditure on energy – over three times more than the proportion spent by households with highest incomes.
- Many consumers still worry about the cost of their energy bills, although the situation is improving. The proportion of energy consumers in debt to their supplier is at its lowest level since we started collecting data in 2006, but some still face very high debts.
- Households use 20% less energy than 10 years ago, which has helped reduce their bills.
- The two-tier energy market means that some groups of vulnerable consumers lose out. Nearly half of consumers who are unemployed, or have intermittent, semi- or low-skilled work, have never switched supplier, compared to under a third of other consumers. This means that they are more likely to be on expensive standard variable tariffs, despite being less able to afford them.
Ofgem’s report also focusses on three ofher areas to understand how well the market is working in the interests of consumers:
- Security of supply
Ofgem’s chief executive, Dermot Nolan, said: “Energy is an essential service and so we want to ensure that the markets work in the interest of all consumers. Transparency is crucial in informing debate and policy development in the energy sector. This annual report shines a light for the public, experts and stakeholders on where the market is, and where it isn’t, working for consumers. It is also a report for us, Ofgem. It will help inform the way we regulate, to protect consumers now and in the future.”