Friday, 30 November 2012

Towards better allocation of household budgets

This month a Working Group Report on Transparency in EU Retail Energy Markets was released, specially for the 5th Citizens' Energy Forum. The report aims to enable more consumer empowerment with respect to well-informed choice of how to allocate household budgets. (p. 4) In that respect, it addresses and evaluates the European energy policy from the perspective of its influence on consumers. (p. 5)
 
"With this in mind, EU energy policy measures have been developed with the aim of delivering meaningful and tangible benefits for consumers. In particular, internal energy market legislation combines high standards of consumer protection with the liberalisation of gas and electricity (wholesale and retail) markets. The rationale behind this dual focus is to establish the basis for creating choice and price competition for consumers without compromising their rights in any way." (p.5)
 
Some of the shortcomings of the policy that have been identified in the report are the difficulties in exercising choice and finding offers that are meaningful to consumers, especially household consumers. For many consumers the liberalised energy market is too complex and difficult to take part in. The EU should try to offer not only a legal right to consumers to choose their energy supplier, but also to enable them exercising this right and provide them with more gains, in terms of price and quality, for doing so. In that respect, consumers need to be made more aware of their rights and be encouraged to participate in the market. (p. 6) 
 
Consumer organisations note, e.g., that introduction of smart technologies and demand response policies may complicate the tariffs systems. Policy makers should make sure that the trend to tariff simplification is upheld. (p. 7) The report notices that the main problem currently relates to lack of transparency (reliable and timely information is a rarity) and price formation.
 
The report further presents a short summary of European and national legislation on electricity and gas supply to consumers, marketing of such services as well as pre-contractual information that needs to be provided to consumers. (chapter 2) Chapter 3 addresses consumer understanding of offers and marketing, pointing out major issues and good practices, e.g. how to assess consumers' cognitive skills. Chapter 4 focuses on enforcement issues, addressing the role of national authorities. Chapter 5 recommends new policy measures to improve transparency.

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