Energy secretary Ed Davey has plans to make energy companies provide access to their books for an annual review. This move will see utility providers opened up for inspection every year, in order to establish whether their pricing is justified.
Companies will also face scrutiny over the way they treat customers. The review is intended to protect consumers and ensure fair pricing and conduct across the industry.
Under this annual review, the financial data of the major energy providers will be thoroughly examined. The goal is to make sure that they are acting in line with a competitive market and that prices are not unjustly inflated.
This move is in part prompted by concerns over a steady and, some believe, disproportionate rise in energy costs over the past several years. It has emerged than in the last decade, the average energy bill for a given household has nearly tripled. This significantly succeeds the rate of inflation in this ten year period
According to the Office for National Statistics, the amount of gas used by an average household has remained almost unchanged since 2003. In spite of this, the cost of that gas has risen by 190% in the intervening ten years. The cost of electricity has experienced a less drastic rise, but with an increase of 120% the effect on household bills is still highly significant. The consumer price index, meanwhile, has seen an increase barely exceeding 30% in the same period.
This has led many to accuse energy companies of inflating prices in an uncompetitive manner, as the price increase looks highly disproportionate to the changes in the rest of the country’s economy. This is also supported by the fact that, on average, a household now spends 27% of its disposable income on essentials such as utilities. In 2003 this was just 19%, further suggesting that the cost of these expenses has risen more drastically than other goods and services.
Companies found not to be acting in a fair and competitive manner will face sanctions. A range of measures will be introduced to make room for adequate action to be taken.
As well as reviewing the pricing policies of energy companies, the government plans to cut certain environmental levies in order to alleviate household energy bills. The extent of these cuts is still under debate, and so is the question of whether to make up the lost funds from taxation in other places.