CMA investigation into the big six energy companies: Energy price comparison sites

 
Andrew Beasley
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Price comparison sites earn commission for every switch they process (Source: Getty)

Price comparison sites for energy are a good thing, right?

They’re the reason that millions of customers have switched energy supplier. They’ve spent small fortunes promoting energy switching to help customers find cheap tariffs. They then help them switch, saving each customer hundreds of pounds in the process.

If it’s anyone who’s going to reach the millions of households still overpaying for their energy because they’ve never switched supplier, it’s these.

At least, that’s what the Competition and Markets Authority (CMA) seem to think in their initial report following nearly two years of investigation into the competitiveness of the energy market.

Read more: It's time to welcome a new era in the energy industry

Their belief seems to be that giving price comparison sites freer rein would allow them to switch more and more customers to cheaper deals - and they’ve proposed some big changes to the way they operate with that in mind.

However, price comparison sites earn commission for every switch they process and the market is dominated by a small number of big players.

While some of the changes the CMA are proposing for the price comparison site market – for example, the ability to rebate switching commission to customers – are clearly positive for customers, others seem entirely focused on boosting their power and profits – for example, allowing them to show customers only the tariffs they’re earning commission on (albeit with a clear indication to customers that that’s what they’re doing).

Of course, the argument is plausible that, since price comparison sites have led the switching revolution, increasing their influence will deliver the end result that so many want – all UK consumers on competitive energy tariffs.

However, while they have undoubtedly played an important role in promoting the idea of switching supplier, and will continue to do so, it’s an important question to ask as to whether handing more power to a handful of providers offering a commission-based model is exactly the right approach to take.

Read more: CMA wants energy price cap for pre-payment meters

If this becomes only real route to switch, and the small number of incumbent players tighten their grip on the market, it’s not impossible that price comparison sites gain the sort of stranglehold on the industry that the big six energy suppliers held for so long.

There are, of course, alternatives to the commission-based model - like the non-commission comparison service displaying every energy tariff provided by Citizen’s Advice.

So while the price comparison site industry is here to stay, and in many ways rightly so, perhaps greater consideration needs to be given to whether it should be quite so strongly supported.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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