Press Release - Protecting consumers? Removing retail price
controls
28 March 2008
By being able to switch suppliers, customers have put
competitive pressures on telecom, electricity, gas, and postal
providers following the removal of pricing controls. Around half of
energy and fixed line telecoms customers have switched supplier and
90 per cent of people doing so found it easy. There have been
problems, however, particularly for more vulnerable customers,
owing to factors such as complex tariffs.
Between 2002 and 2006, Ofcom, Ofgem and Postcomm removed retail
price controls in markets that had previously been dominated by a
few big suppliers. These controls had been imposed on these
suppliers to protect consumers while competition was weak. Ofcom,
Ofgem and Postcomm removed the price controls because they
considered that growing competition meant that the controls were no
longer needed.
The processes used by Ofgem, Ofcom and Postcomm for removing retail
price controls were consistent with their statutory duties of
protecting consumer interests through the promotion of competition.
The conditions for competition have developed in the relevant parts
of all three markets, and the regulators have taken action to help
consumers take advantage of competition.
However, problems such as complex tariffs and a lack of information
mean that some consumers, particularly those classified as
vulnerable, are still unable to take full advantage of the
competitive market. In addition, the suppliers that in the past had
monopolies continue to have a strong position in their original
markets (46 per cent of revenue in gas, just under 50 per cent of
revenue in electricity, and 48 per cent by volume in
telecoms).
There remains a need, therefore, for all three regulators to
continue to use their competition and consumer protection powers to
ensure that markets still protect the consumer. And, in February
2008, Ofgem announced a probe into the electricity and gas markets
using these powers in response to recent concern following price
rises.
Tim Burr, head of the National Audit Office, said
today:
“The removal of price controls is an important step in the
development of competition in these markets, but it is not the end
of the story. Ofcom, Ofgem and Postcomm need to be vigilant, and be
prepared to use their other powers when necessary, to ensure
genuine competition is present and that it is working to serve
consumers.
“And there are clear lessons for regulators considering removing
price controls in other markets. In particular they must be more
diligent in getting all the data they need and ensuring that their
decision making is transparent and makes good use of
consultation.”
Notes for Editors:
- Press notices and reports are available from the date of
publication on the NAO website, which is at www.nao.org.uk. Hard
copies can be obtained from The Stationery Office on 0845 702
3474.
- The Comptroller and Auditor General, Tim Burr, is the head of
the National Audit Office which employs some 850 staff. He and the
NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 19/08
All enquiries to Barry Lester, NAO Press Office: Tel: 020 7798
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