On 30 June 2014, the European Commission’s DG SANCO (whose remit includes consumer issues) published the 10th Consumer Markets Scoreboard, which tracks consumer conditions in 52 different markets for goods and services.  The Scoreboard is a tool for detecting underperforming markets and indicating areas that require greater analysis. 

As a result of its findings, the Commission has announced its intention to undertake an in-depth study into the retail electricity market.

Scoreboard outcomes

The Scoreboard shows that, despite improvements in the period since 2012, the utilities markets continue to perform poorly in terms of the key consumer areas of comparability of offers, choice of providers, ease of switching and actual switching.  The Commission notes that it is working with key stakeholders on increasing the transparency of energy offers and bills, ensuring customers' access to their consumption data (also by promoting smart meter roll-out) and facilitating switching.

In the country-specific assessments, one of the largest drops in UK consumer market performance has been recorded in the market for electricity services.  The Commission suggests that performance deterioration in the market for electricity services may reflect consumer dissatisfaction that prices are rising but electricity suppliers are still posting strong profits.

At EU level, the electricity market ranks as the fourth lowest amongst the services markets in terms of consumer market performance.  The Scoreboard suggests that consumers are not able to take advantage of, or benefit from, energy market liberalisation.  Assessment of the market differs considerably across the EU and is the lowest in southern European countries. 

Electricity Market Studies 2010 and 2014

In 2010 the Commission carried out a study into the electricity retail market following the results of the 2009 Scoreboard.  The core issues analysed in the 2010 study included the choice of suppliers and tariffs, prices, transparency and comparability of offers, switching suppliers, billing practices, consumer problems and complaints as well as dispute resolution schemes.  Evidence was gathered in all EU countries.  The research included a mystery shopping exercise which replicated consumers' experience.  Mystery shoppers tried to find the best offer or contact customer services, to see how the electricity markets across the EU work for consumers in practice.

The new 2014 electricity market study will compare the findings of the earlier study with the current position, and consider what has improved across this period.  It will also examine the impact of the implementation of the Third Energy Package legislation, as well as of novel collaborative initiatives by consumers and consumer associations, and will assess the need for possible future initiatives. 

The Commission has also announced that it will carry out a second market study (through behavioural testing) on increasing consumers' willingness to read and capacity to understand contract terms and conditions across all markets. 

Implications for UK energy suppliers

In comparison to the joint Ofgem/OFT/CMA assessment, which resulted in last week’s formal Market Investigation Reference to the CMA and could lead to the imposition of far reaching remedies, the Commission’s retail market study, while potentially intrusive in terms of information gathering, will only present findings and recommendations.  Its aim is to understand the consumer issues and drivers.  It is not a repeat of the 2005-2007 Sector Inquiry into barriers to competition.  Nonetheless, other Commission directorates, including Competition and Energy, may be involved in the Study, will certainly have access to its findings, and have powers to initiate additional studies and investigations.  Further, the Commission’s suspicions of the reasons behind poor consumer satisfaction echo those raised widely in the UK.  We can expect the CMA to take note of the Scoreboard and (if the Commission reports before the CMA does) the eventual results of the Commission’s Study.