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Do the Big Six deserve their loyal customers?

Today is a watershed moment for the energy market. The Competition and Markets Authority has confirmed what we’ve known all along – competition isn’t working for consumers.

The Competition and Markets Authority (CMA) has published its initial thoughts from its energy market investigation, called for by thousands of Which? campaign supporters.

Energy market competition and prices

The CMA has found that the customer base of the Big Six is mostly made up of standard tariff customers, with many of these being with the same supplier for more than 10 years. This has left millions of people paying over the odds for their gas and electricity.

In fact, the CMA has found that 95% of Big Six dual fuel customers on standard tariffs could have saved between £158 and £234 each year by switching. In addition, those same customers are providing the suppliers with 12% more revenue than those on fixed tariffs, suggesting that loyal customers are subsidising other consumers. Competition clearly isn’t working in the energy market.

Energy supplier customer satisfaction

The CMA has also found that complaints have increased five-fold between 2007 and 2013, with a doubling of complaints to the Ombudsman in the last year. The report also points out that the Big Six suppliers did very poorly in our customer service survey in 2014.

What are we doing?

The CMA will now continue its investigations, and expects to publish its provisional findings in May this year.

As part of our Fair Energy Prices campaign we want the Competition and Markets Authority to develop a set of solutions to repair the energy market and make it work for everyone, not just the suppliers. This must include establishing a fair price that you can trust, to restore consumer confidence in the energy system.

People will also be looking to politicians of every party to set out how they’ll deliver fair and affordable energy prices in the future.

So what do you think of the CMA’s latest findings? Do you think the Big Six deserve their customers? Have you been a loyal customer that’s been paying a standard tariff for years? Are you now tempted to switch energy suppliers?

Do the Big Six deserve their customers?

No (89%, 232 Votes)

Yes (6%, 16 Votes)

Don't know (5%, 14 Votes)

Total Voters: 262

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Comments
Member

Cheaper energy prices are readily available to most consumers, but they don’t take advantage of them

First, loyalty is not given a mention in the CMA interim document. The fact is that an incredible number of people have stayed on Standard Variable Tariffs when they could easily change, with their current supplier, to a fixed deal usually with significantly lower charges. Stay loyal, if you like, but save money.

The question we should be asking is why so many do not bother to change – is it inability, ignorance or frightened of change? If we could deal with those issues, and switch them all off SVTs to cheaper tariff such as a 1 year fixed, we could cut their bills substantially at a stroke. So we need to both educate people in what and how to do it, then persuade them to get on with it.

The other question is – why do we have standard variable tariffs at all now? When fixed price fixed term tariffs were introduced there were obligations on both supplier – to keep prices fixed for from 1 to 4 years – and on the customer to stay with the contract or pay a fee to leave. Now, most fixed deals are on the consumer’s side – you can have fixed prices and leave at any time without any penalty if you find a better deal, with your current supplier or any other.

Which?, you could use your TV advertising to show people how easy it is to switch through your site. Ofgem could publicise it as was done a couple of years ago, and consumers could get on and do it. Immediate gains now – not in a year when the CMA report might take effect.
Energy suppliers – do what E-ON do and tell people when a cheaper deal is available. And why not be proactive and encourage people to switch yourselves – it might improve your image,

Member

Malcolm – Some of the reasons why people do not switch energy supplier are similar to the reasons why many of us are still using cheques, when electronic banking and smartphone payments are seen as the way forward by others. We are agreed that we need to keep cheques for the time being.

Many are not good with money. Look at the number of people who are living in debt and paying a lot of interest. Some struggle to cope as they get older. Unemployment, illness, family problems, caring for others and lack of time in our lives can make it difficult to make the right family decisions.

I don’t see why I should pay any less or any more for electricity and gas than my neighbours. Energy is vital to all of us.

Member

Malcom: The onus is not entirely on consumers who fail to switch. People are reluctant to switch because they are not incentivised to do so for a few pounds price difference, especially those who don’t have computers or are unable to pay by DD for one reason or another. By putting the onus on consumers who don’t switch is letting the energy companies off the hook. The core issue is the problem of vertical integration, where companies are able to determine their own retail prices, leading to tacit collusion = no competition. Competition needs to be restored in order to MAKE IT WORTHWHILE SWITCHING and I fail to see how that can happen until the energy companies come clean and more transparent about the difference between their wholesale and retail prices. This is the reason why the CMA were appointed to investigate this enduring energy saga.

Tacit collusion has usurped market competition culminating in a general apathy among some consumers who are unwilling or unable to play the market system which they do not trust. Comparison sites are already demonstrating smaller companies are unable to keep up with the Big Six on prices which is very apparent with Npower and Scottish Power now offering lower deals on tariffs. Their terms and conditions stipulate they can pull out of fixed deals also by giving you 42 days notice if you are unable to meet their terms and conditions, so I would advise anyone switching to read these before switching.

Will the CMA report be issued before or after the general election in May I wonder?

Member

Beryl, vertical integration does not seem to be a big problem according to the report, and also according to some independent energy companies.

You presumably shop around for much of what you buy. How should we then buy energy? We need to make it easier for people to find the best deals – quite easy already if you visit a comparison website and even easier if that does the switching for you – try Which?Switch. For others not au fait with the web then you can use the phone for example.

“A few pounds difference”? If it were, then maybe not worth the effort. But for people on standard variable tariffs then it can be one or two hundred pounds or so.

I am no friend of the energy companies but we cannot continually expect consumers to simply do nothing on their own account. No more than shopping around for insurance, food, fuel, household appliances and the other everyday chores.

Which? and Ofgem should be helping them get motivated to do this as well as trying to get a better energy market easier to access.

The CMA report is due in December, I believe.

Member

Malcolm: I understand most fixed deals are paid using DD and for you and I that is probably never going to be a problem. As Wavechange has already pointed out in another post, the penalty the banks impose on going overdrawn can be quite daunting and for some whose current accounts can easily become overdrawn depending on their lifestyle and personal circumstances, it is not worth the risk. I can vouch from my own current account that the bank will sometimes take two monthly DD lots from my current account through overlapping one month into the next but fortunately I am in a position to make allowances for that to ensure this doesn’t happen. Not everyone however in is a position to do that.

As you know I am in the process of switching and am looking at as many options as I can but I would reiterate the importance of reading all the terms and conditions, (and there is an enormous amount to digest) but never forget if your energy company’s DD payment goes overdrawn by even a small amount, even if it is an arranged overdraft it can still cost you dearly and in the event of your fixed energy tariff payment not forthcoming the energy company can exercise their right to cancel your ‘fixed’ contract according to their T & C’s.

Member

Beryl, I understand your concerns, of course, and a minority of people may well be affected in this way. However that should not stop us helping the majority, now, to switch to cheaper tariffs, as soon as possible. I was astonished to learn that between 50 and 80% of some energy companies customers are on standard variable tariffs.

Member

I look after the Eon gas and electricity accounts for an aged and infirm gentleman. I have been trying to get him to agree to switch to a cheaper provider but he does not wish to change.
Recently he received a letter from Eon offering him a cheaper tariff which would result in annual savings of about £250. I immediately phoned Eon on receipt of this letter, that was two days after the date of the letter, and asked to be switched to this cheaper tariff.
I was told by Eon that this tariff had ended now and the cheapest tariff they now had on offer would cost an additional £100 p.a.
How can the cost of gas and electricity jump £350 in two days?
I suspect Eon are up to something, they have played this trick in the past. Their customer is registered as vulnerable with them and exists on a tiny state pension, I feel sickened by Eon’s behaviour.

Member

Several large local authorities in Yorkshire and I believe Lancashire, mounted bulk switching campaigns in 2013. Hopefully they will do so again later this year or in 2016. These matched individual household circumstances to the cheapest suppliers. This process seemed to encourage “undercutters” to take the big six customers away. Aditionally an energy provider under the umbrella of a well known supermarket chain effectivly bought gas from British Gas and was able to offer cheaper tarifs than B G whilst presumably making a proffit.
Anything that undermines the dominence of the huge corporations over individual customers is good.
possibly trade unions and any other societies to which individuals belong in reasonable numbers should investigate a big switch of their own.
People who are not computer litterat will still need to be helped to participate in this will need to be helped. Also the discounts for paperless billing and self meter reading will have to be tackled but its a start