Speech at Money Saving Expert
Secretary of State Edward Davey's speech at Money Saving Expert
Introduction
Thank you Martin [LEWIS] for that introduction, and thank you for inviting me here to your offices at MoneySavingExpert.com.
It’s also good to see some familiar faces from the Big Energy Saving Network here in the audience.
All of you are consumer champions.
MoneySavingExpert.com is focussed on saving money for its 15 million online users – not just on energy but on a whole host of things.
But your Cheap Energy Club is a great tool for alerting people to the best energy deals around.
The members of the Big Energy Saving Network operate out in the community - providing advice - giving personalised help - often to the most vulnerable in our society - so people understand all the things that are available to help keep their houses warm, keep their energy costs down – and to switch too.
Whether in cyberspace or on the streets, you share this common purpose.
Helping people to save money, and to stay warm for less.
And that is what I want to talk about today – how in Government I have sought to ensure that the needs of consumers come first.
How we in Government are working together with you to help people get the best deals out there, improve their homes and cut their energy bills.
And how we are working to reform the energy system so it better serves the interests of our citizens.
To do that I will obviously have to paint the picture of how things have changed over the past few years – and give you an idea of how I see the future.
But let me first set out the difficulty of the challenge we face.
Consumer first
In Government, we are dealing with very complex interlinked issues on energy and climate change – balancing the needs of energy security, decarbonisation and the costs of energy for business and the public.
Of course, it is in the interests of our society to ensure energy security. We are so reliant on energy for our daily lives.
So we do have to drive investment so that power stations and import infrastructure and distribution networks get built or upgraded.
And that comes at a cost to tax payers and bill payers.
And it is also in the interests of society that we live up to our clean energy commitments.
Runaway climate change would mean a harsh and brutal world. And as a father, I don’t want that future for my children.
So we do have to make our energy system climate friendly, driving the development of low-carbon technology and overhauling our housing stock to be more energy efficient.
This too comes at a cost to tax-payers and bill-payers.
Government’s job is to make sure these necessary things get done, but in the most cost effective way possible.
And we have reduced the impact of these things on bills.
Support for clean energy, for energy efficiency, and help for the most vulnerable, now makes up just 7% of the average households annual energy bill. Down from previous years.
And we estimate that when you take into account things like the gains made in energy efficiency in homes and appliances because of Government policies - households are paying on average £90 less on their energy bills.
But over the last decade, as wholesale prices have risen, energy bills have risen pretty much every year.
And although they are now coming down again, I can understand when people think this issue of energy cost has not got the attention it deserves.
But I can assure you that helping people heat and power their homes at the least cost possible has underpinned everything I have done.
It’s why we are focussed on cutting the costs of low-carbon energy, so it can compete, in time, without subsidies.
It’s why we have been working constantly on energy efficiency to help people reduce their bills by improving their homes.
It’s why we have focussed on increasing competition so now people can get out of the clutches of the Big 6 if that means they can reduce their bills.
It is why the Competition and Markets Authority are now doing a full market investigation into energy so that we can really understand if and where people are getting a raw deal.
A step that was resisted for years by the big energy companies, and ducked by previous Governments.
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Turning the market around
In fact, it’s vital all parties listen to the CMA.
Nurturing more competitive markets is not easy or quick.
To deliver the benefits of competition to consumers requires constant effort by government and regulators.
Not least because markets develop over time.
Looking back, it was the last Labour Government that took forward the process of energy privatisation started under the Conservative Governments of the 80s and 90s.
Far from over-regulating, the last Labour government lifted lifting price controls and the like.
Their failure was to be complacent about competition.
Under Labour’s reforms, the Big 6 consolidated the market and became excessively powerful.
There was little innovation, and little imperative to give customers a good and fair service.
The tariffs and bills system was so complex even Stephen Hawking would have struggled to work it all out.
The switching system was tortuous, effectively discouraging people from moving supplier.
It also meant that even as the prices people paid for their energy rose as wholesale prices rose, there was no reason for the suppliers to compete fiercely on cost or service or value.
Slowly and surely, we have been turning this around.
First, we have deregulated to make it easier for new small flexible and innovative suppliers to enter the market.
There are now 21 independent suppliers taking on the Big 6. Three times as many as in 2010.And they are aggressively going after customers, offering better and better deals, regularly topping the best buy tables.
Their market share has grown from under 1% in 2010 to over 10% now and its growing all the time as more and more people switch away from the Big 6.
Second, Ofgem’s retail market reforms mean bills are clearer and easier to understand, tariffs are simpler, taking away some of the ‘fear’ factor people had when the bill landed on their doorstep.
And this will keep getting better. Simple things like putting QR codes on bills will make it easier to compare deals, so people can scan them with their smart phone – and transfer the data more easily.
The licence modifications for QR codes were signed off by my Department last week, so they should be hitting bills by the end of June – and apps will be available to read them.
And as Smart Meters roll out people will get near real time information about their energy use, so they can see what it is in their homes that is costing them most money.
Switching
Third, we have helped revolutionised the switching system.
Switching rates fell between 2008 and 2013, partly because doorstep mis-selling was stopped, and because the system was slow and cumbersome, taking up to a month and a half to switch.
So I challenged the energy companies to cut the time it took to switch.
And switching times have been cut in half.
You can now be with a new energy supplier in just three weeks.
But let me remind you. My ambition has never been for three week switching. It is for 24 hour switching.
We are only half way there and I want industry to move as quickly as possible to reach that goal.
But it’s not just about switching times.
People need to trust the system too. That is why Ofgem’s new switching code of confidence is so important.
It is also why the new concept of collective switching I have been championing is important too.
When people switch together – along with their neighbours and friends – they can get a better deal. There is safety in numbers and greater purchasing power too.
I kick-started collective switching with the Cheaper Energy Together Scheme in 2013 and since then concept of collective switching has become mainstream.
Local Authorities are taking part in collective switches. Local groups too.
Newspapers like the Sun are doing it.
MoneySavingExpert.com has been very active. Your Big Winter Switches over the last few years have helped over 100,000 households onto a better deal.
Overall, we calculate people have saved over £20m through collective switching.
Power to switch
So with 27 energy companies on the market and some fixed deals £100 cheaper than they were a year ago, my message is loud and clear: there has never been a better time to shop around, switch and save.
By taking advantage of the best energy deals on the market, millions of people could save around £200 - and some can save even more.
I know that MoneySavingExpert.com and the Big Energy Saving Network are spreading that message.
But we have to do everything possible to reach people.
As the early findings of the CMA investigation has confirmed, over thirteen million households in the UK are paying over the odds for their energy because they have never switched.
That’s why last month I launched an incredibly ambitious Government switching campaign.
The Power to Switch campaign – designed to wake people up to the money they can save.
And turn them on to switching.
Even at this early stage we’ve seen a huge response.
Tens of thousands of people looking for a better deal through the ‘be an energy shopper.com’ website alone.
And I know from speaking to Martin, that MoneySavingExpert.com is seeing significantly more traffic to their Cheap Energy Club compared to last year.
Of course Government advertising won’t reach everybody. That is why it’s great that this campaign has so many supporters and advocates.
That is why the work of the Big Energy Saving Network is so important – out in the community – spreading the message.
I am very proud of the achievements of the Big Energy Saving Network in supporting vulnerable consumers, whether through helping them find a better tariff or improving their energy efficiency.
I am determined that competition works for the most vulnerable not the just most internet savvy.
That’s why I am so proud of the work you in the voluntary sector, through the Big Energy Saving Network, are doing.
Almost 100,000 people were helped in the first year of the Network– and we are aiming for another 100,000 this year.
And I am committed to continuing this record of success, that’s why I am committed to securing further funding to make sure the Big Energy Saving Network can keep helping people stay warm for less.
So let me turn my attention to how the Government is supporting energy efficiency.
Energy efficiency
Energy efficiency is one of the main tools for reducing the burden of energy prices on all consumers.
But in many ways the poorest and most vulnerable stand to benefit the most.
Yesterday I published the first Government Fuel Poverty strategy in over a decade.
And it has energy efficiency at its heart with the target to bring as many fuel poor homes as reasonably practicable up to an efficiency rating of Band C by 2030.
And as a third of fuel poor families live in rented homes – so for the first time we are going to make sure landlords improve draughty properties.
But every home can benefit from energy efficiency – and cut their bills permanently.
That is why this Government launched the first nationwide energy efficiency programme that everyone can access – the Green Deal – working alongside the Energy Company Obligation.
To date over 1 million homes have been made warmer, greener and cheaper to heat through the Green Deal and ECO.
The Green Deal was a novel approach to promote energy efficiency, and to mobilise private investment.
Like any innovative scheme, there have been many lessons to learn early on, and we have worked with the supply chain to make the Green Deal easier for consumers to access and to get the incentives right.
Green Deal Home Improvement Fund
But the success of the Green Deal Home Improvement Fund shows we are getting closer.
Under this scheme the Government provides vouchers for energy efficient home improvements, such as new boilers, wall insulation and double glazing.
Many of the vouchers are being used to support substantial improvements, particularly solid wall insulation.
The first two releases of GDHIF were worth almost £150m.
And we have already issued more than 25,000 households with vouchers since it launched in June last year.
Today I can announce the launch of release three.
From midday on Monday 16th March, people will be able to apply for new money off vouchers worth up to £70m, with up to £5,600 available to household in England and Wales to help with the cost of installing energy saving home improvements.
Households will be able to get up to £3750 for installing solid wall insulation.
And they will be able to get up to £1250 for installing two other energy saving measures from the list - a 25% increase as we want to encourage people to think about making more than one improvement where that will benefit them.
This is a first come first served scheme, so I urge people to find out what it can do for you by calling the Energy Saving Advice Service in England and Wales.
Conclusion
Ladies and Gentlemen, I have talked today about how we have turned around an energy market that wasn’t working for consumer.
About how people can now more quickly switch energy supplier and save hundreds of pounds.
About how they now have much more choice and competition is helping to bring bills down.
And about how the drive for energy efficiency is bearing fruit – cutting bills for millions of people.
There has been a quite a revolution in energy since 2010.
Things are getting better. But I know there is still a lot more to do.
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The provisional findings and remedies of the Competition and Markets Authority, expected to be published before the summer, will be THE seminal moment for the incoming government.
And their final recommendations will be THE seminal moment for energy markets in the next Parliament.
Whoever holds the reins of power after the General Election must not let that moment slip by.
Ensuring electricity and gas bills are affordable for everyone should be too important to put party politics above following advice of the independent experts.