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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
Profile photo of malcolm r
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,

Profile photo of wavechange
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.

Profile photo of Beryl
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?

Profile photo of malcolm r
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.

Profile photo of Beryl
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.

Profile photo of malcolm r
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

Profile photo of malcolm r
Member

Roy, price comparison and switching services have telephone as well as internet access. So there is no need to be computer literate. I think the whole system requires much more “educational” publicity to help people realise switching is worthwhile and should be straightforward. Which?Switch seems a good place to do this.

Profile photo of Beryl
Member

John: This is a typical example of how vulnerable people who are reluctant to switch are still being exploited by the energy companies. I had a similar problem last year when Scottish Power were advertising a cheaper tariff. When I enquired about it I was told I would not be eligible as I was considered a higher than average user.

There is still a long way to go before any trust is restored to the energy market.

Profile photo of bishbut
Member

Too many people to me seem to have more money than sense. Not just for buying energy but when buy anything at all. Older people have not ever been used to change so they are reluctant to change. The media could help more.

Profile photo of ChrisGloucester
Member

Well, bishbut heres one old codger who has switched several times. Think you comment is a bit general although I’m sure your heart is in the right place.

Profile photo of wavechange
Member

It’s all very well for those of us who are on the ball and find it easy to do regular energy price comparisons and switch supplier when it is worthwhile to make the change. Please can we spare a thought for others who don’t switch, for whatever reason, and end up subsidising those who do switch. Beryl has pointed out some of the problems.

Before privatisation, we were all paying the same for energy as our neighbours. With government control of energy pricing, the same could be achieved today, and all the energy companies would need to compete on is their standards of service.

Member
vicky says:
19 February 2015

the reason ive not switchef in five years (last switch was due to poor service in one case and an instore promotion in the other) has a couple of factors. as a single person household and relatively low user i dont see my energy cost or saving being that high. ive also had it in the back of my mind i may move soon and dont want a penalty for doing so before the end of a fixed rate.

Profile photo of william
Member

“Do the Big Six deserve their loyal customers?” I think a better question would be “Do customers deserve a better regulator” one then actively works in the interests of consumers and if it doesn’t have the right remit then pro-actively works to get the remit it needs to do the job it should be doing.

Profile photo of Sophie Gilbert
Member

Indeed, another question could be “what do we think of CMA’s performance and capability?”. It reminds me of the MP expenses scandal. Blameworthy MPs deservedly got it in the neck, but what about those who signed off “cleaning the moat” as a reasonable expense???

Profile photo of BobJames
Member

I don’t know why people are saying the energy market is broken. The opportunity to switch is there for everyone. I switched to First:utility over a year ago, onto their one-year fixed price tariff as this was the cheapest. Since then, as they have offered successively cheaper tariffs I have changed onto them for no extra fee. I am now paying less than I did for energy eight years ago.
At the afternoon dance group I go to I told them of my experience and offered to help anyone who didn’t have internet access – the result: no-one could be bothered! I also suggested that our local community group contact vulnerable people in the area to see if they could be helped – the result: the community group officials said it wasn’t within the groups remit to do anything like this! It seems that people just won’t be helped.

Profile photo of ChrisGloucester
Member

For market forces to push prices down through switching there has to be somewhere to switch to that actually saves money by a reasonably significant amount. After your first switch away from one of the big six cartel standard tariffs, when certainly once only significant savings are to be made, any savings on subsequent switches are really quite small. I have switched several times but it’s really been more based on better customer services and understandable billing than on saving money. I keep reading that savings of over £200 can be achieved by switching but what they don’t tell you is that’s only once. On any subsequent switch you’re lucky to save £20 and even that saving is temporary.

Perhaps some will disagree with this but I’d make them an offer, Save me £200 on my energy bill through switching to a supplier of your choice and I’ll give you 25% of the saving. Bet there aren’t too many takers, although it’s a bet I’d be happy to lose?

However if you’ve never switched then do so, but I think if everyone did make that initial switch the “normal price” would be a little higher to maintain shareholder dividends. And once we’ve all switched the once where is the market driven pressure to get prices down after that?

I still think re-nationalisation could work and could give greater savings. At least then there would be no shareholders to pay and all profits could be ploughed back into improved efficiency perhaps leading to even lower prices. It doesn’t have to be like the bad old days of nationalised utilities if a competent management team ran it, overseen by an independent watchdog enforcing clear directives on efficiency and price levels.

Profile photo of wavechange
Member

Chris – You described yourself as an ‘old codger’ earlier, so I expect you can remember how inefficient some of our nationalised industries were. What has happened with energy following privatisation has been disappointing in my view. Yes we have competition, but it looks as if the shareholders are benefitting more than the customers. We have also allowed other countries to take a significant amount of control of our energy companies. After signing up with Scottish Power I discovered that it is controlled or owned by a Spanish company. Many of us question why so much has been invested in wind power, which is not in itself adequate to maintain a continuous supply of renewable energy. We are having smart meters forced on us, at vast cost. No doubt the government must share responsibility for these decisions. Despite simplification, energy pricing is a very complicated issue for the public.

Everything that I have read suggests re-nationalisation is a non-starter on financial grounds, but perhaps the government could control the worst excesses of the energy companies whose main aim is to serve the wishes of their shareholders.

Profile photo of ChrisGloucester
Member

Well Wavechange, I’m not altogether sure “re-nationalisation is a non-starter on financial grounds”. If the state bought out just one supplier and ran it well enough and with cheaper prices that would set the benchmark for other suppliers to follow or lose custom.
This approach would prove if a nationalised energy supply system could work. If it did work and the sate could not afford to buy back the rest then at least those companies remaining private would have to offer competitive prices and services. If the state system proved to be rubbish then it could be sold back into private ownership, but I think it could succeed if we learn the lessons of the past.

I still think this fundamental element of national infrastructure is too important to be left entirely to free market forces. A compounded issue when you realise all competitors buy from the same wholesaler and the only part which is really “free market” is the distribution and billing. So the potential for competition is therefore limited anyway, but the the beneficiaries of profits generated are the owners of such companies rather than the public. Seems a false economy to me.

Of course the privatisation of energy supply originally had as much, if not more, to do with raising money for the treasury as it did to benefit consumers. Back then the Government was effectively selling the family silver to balance the books. The same short term thinking we still see today with organisations like Royal Mail.

Don’t be fooled fundamental elements of national infrastructure can be, and in the long term are best run through national ownership. That is if run properly, and I see no reason why they shouldn’t or couldn’t be run properly, and certainly not simply because they weren’t before.

Profile photo of wavechange
Member

Chris – I have suggested that the state could try running one of the energy suppliers in an earlier Conversation, so we are agreed on that. I don’t claim any originality for the idea either.

Profile photo of malcolm r
Member

I would be happy to see an unsubsidised state-run energy supplier as a competitor. I am concerned about the state’s ability to run efficient enterprises though.

Ofgem reports on the gas and electricity transmission and distribution networks as follows. Their costs currently amount to around £300 on an average bill.After privatisation by 2005 they were costing us 45% less due to efficiency savings. Network upgrades then added to costs but they are still 17% cheaper in real terms.

Profile photo of John Ward
Member

Is it credible that the government would fork out billions of pounds to buy out the shareholders of one of the major energy companies and just dump that cost on the national debt? And which one would it pick and on what criteria?

Profile photo of wavechange
Member

Is there any need for the government to buy an energy company to become a supplier, John?

Profile photo of malcolm r
Member

John, I see no reason why the state has to buy an existing company to sell gas and electricity. It can do what 18 of the 24 suppliers have done – set up from scratch.

I am not a proponent though – track record is poor, political agenda might get in the way of proper operation. Would it be subsidised – in practice if not in principle? And if it fails we’ll end up with a big bill for the taxpayer. But some people still believe in state ventures.

I would much rather see a true cooperative supplier set up where it operates commercially but a profit share is distributed to its members – the customers.

Profile photo of John Ward
Member

Not at all – I was merely responding to Chris’s suggestion above: that the state should buy out just one supplier and run it well enough and with cheaper prices in order to set the benchmark for other suppliers to follow or lose custom. There is no reason to do it that way at all. It need not take long for DECC to create a fairly lean supply company staffed with the best brains in energy procurement, pricing, and tendering & contract management which are the key functions to keep in-house [plus commercial policy, finance, internal admin, HR, legal, and management]. The customer services, meter reading, billing and IT functions could all be contracted out to a service provider [like Capita or Serco for example – there are others]. Managing outsourced contracts competently, efficiently and economically would be a major challenge. Avoiding political inteference [like “buy more renewable energy even if it costs more”, or “don’t cut people’s supply off even if they won’t pay”] could be another. The relationship with Ofgem would be interesting. Unless it bought some customers from another company it could take ages to grow to an economically efficient entity but it could start with some highly-attractive tarifffs to appeal to consumers and then let the price war begin.

Profile photo of John Ward
Member

Malcolm – My previous comment was really following on from Wavechange’s question. I was not disagreeing with you. Although I think a competitive state supplier could work, I share your reservations and would prefer a cooperative entity if it’s to happen at all. Overall, I would rather see tougher regulation of thecommercial structure to raise service standards and to curb excessive profits and shareholder dividends One of the criticisms of the existing structure is that the energy comanies are not taking much commercial risk for the 5% or more in profits they are generating. That’s not entirely true as so much now depends on the weather and on the future wholesale prices of gas and power station fuel [both Centrica and SSE have come a cropper there] but they’re still doing very nicely thank you for boring old utiity companies.

Profile photo of ChrisGloucester
Member

wavechange, might be you who put the idea of the state buying one supplier in my head, and I won’t claim it as an original idea either, but I still think it’s a good idea.

Profile photo of wavechange
Member

I’m a scientist, Chris, and know that we can speculate all day, but the only way we will find out whether a private company or the state will do a better job is by comparing their performance in the same market. Energy is so important that it’s not acceptable to have so many people paying far more than they need to, and it seems very likely to me that the current confusing energy pricing has evolved to promote confusion.

I am watching with interest what happens with Royal Mail following privatisation. So far I have seen no difference in the excellent standard of service I receive. It is probably too much to expect prices to fall but at least their CEO is on track to receive remuneration typical of a company.

It does not matter who comes up with an idea unless those in charge of this country bring it to fruition. 🙁

Profile photo of John Ward
Member

The media had obviously prepared themselves for some serious energy company bashing in advance of the release of the CMA initial report and when the embargo was lifted at 7.00 am on Wednesday the headlines were heavy with angry accusations. But the report hasn’t really provided the ammunition the broadcasters and newspapers were anticipating, and the big let down was the view of the CMA that the firms that are both producers of gas and electricity as well as retailers are not actually exploiting the vertical integration to the disadvantage of the conumer as much as has been suggested.

I think we already knew that people who haven’t switched tariffs or suppliers have probably paid more than they needed to for their energy; what we don’t know is how prices might have altered, and whether it would have better or worse for consumers, if there had been a non-stop switching epidemic across the major suppliers. They would – presumably – not have sat on their hands and watched thousands of accounts move out to X or Y without tinkering with their terms to hold them in until a new equilibrium emerged. Of course, the lack of mass account migration meant the companies were disinclined to act more competitively, so there is a need for a certain amount of movement by consumers but not so much that it becomes self-defeating by adding costs to the industry that would hurt households in the long run.

It is odd in this industry that market share rather than customer spend is not the main driver of competition. It must make enormous sense to any of the Big Six to expand their customer base as much as possible because the economies of scale are prodigious. It costs very little more to service an extra 100,000 customers; no massive extra infrastructure investment is required because it is already there [and smart metering will propel this benefit to another level], and any additional customer-servicing costs are massively offset by the ability to drive down the bulk procurement cost of the gas or electricity. So why pricing is not much more aggressive is a bit of a mystery to me, and it must be down to the tendency of customers not to change. Valid reasons for this have been cited above and in previous Which? Conversations, and perhaps also it is because a large percentage of consumers were used to the old days of the gas and electricity boards where there was no choice anyway and haven’t got used to the freedom that now exisists].

But there must be more to it than that and I think Malcolm is right in advocating a public information and education campaign. Unlike with lots of other purchases, changing where you buy your energy supplies is an absolute doddle, and I guess most people know that. I know we could save a lot on groceries if we went to Asda instead of Sainsbury’s but Asda is thirteen miles away which means a twenty-six mile round trip and forty minutes lost time. None of that applies with energy – you can do it from the comfort of your own home, and it takes seconds and costs nothing. The complexity of the multitude of tariffs and T&C’s was held up as the Big Obstacle but Ofgem has mostly dealt with that [incredibly, one of the energy companies was moaning about that yesterday claiming it was impeding competition by taking away their opportunity to tweak their terms].

Unlike groceries, there aren’t many ways in which companies can differentiate their energy product or add any additional ingredients to it to make it more appealing. Customer service and comparative cost are the only things to look at and, since most consumers hardly ever experience any human contact with their supplier, it comes down to cost in the end. The CMA has done us a service in making it clear that people could have saved hundreds of pounds if they had tried a bit of disloyalty – that dispels the belief in many people’s minds that it isn’t worth the candle; and the media have also helped by building up for a big storm on several fronts and finding that there really was only one story – so they trail-blazed switching and gave it both barrels. I’m not sure how much the industry is to blame for people’s inertia, but that doesn’t matter any more because the numbers are out there now.

Another minor but important by-product of the media reaction was the attention given to two things: one, the fact that retail prices can never track wholesale prices because government levies and fixed overheads make up sizeable proportions of the bill, and two, changing to a new tariff from the same supplier can result in significant savings without the upheaval of switching to a new supplier [many people who have switched supplier have had things go wrong and that has poisoned the choice in the popular imagination].

Profile photo of John Ward
Member

I agree with Chris that you only get one bounce of the ball. As a gesture of goodwill (!), the Big six could at least write to their loyal customers of three years or more on the standard variable tariff and say – “We’re going to put you on our best rates for your preferred service in three weeks’ time unless you instruct us otherwise; you can change back at any time if it doesn’t suit”. Then we would learn where inertia stops and apathy prevails.

Profile photo of wavechange
Member

Do you think the shareholders would approve of their companies helping their customers in this way, John?

Profile photo of John Ward
Member

Well, sometimes goodwill yields dividends. It’s always worth a try in my book. Once one of them did it the rest would surely have to follow or be shamed.

Profile photo of malcolm r
Member

As an alternative to the public energy companies could we set up a true co-operative energy company where the members (customers) receive a profit share? Who would like to set one up?

I’d like to see Which? put forward an impartial, unbiassed and constructive case for how best to provide energy – bearing in mind that private companies will need to make a profit for their shareholders. Perhaps they could ask for some or all of the “fringe costs” to be removed from our energy bills and funded from taxes; smart meter costs and environmental/social costs for example that will add up to £100 a year and are then subject to vat, it seems. Look at the regulated profit on transmission – it is quite generous. Put a stop to expensive and unreliable “renewable” energy sources like wind and solar with high rewards for the investors. Look into tidal power as an option. Ensure that the needy are properly supported with a subsidy – but not those who do not need it (so scrap the single petrol pump tariff mantra). Give winter fuel payments only to those in need – perhaps exclude anyone paying standard rate tax.

We may not agree with them all, but rather than moaning about a “broken market” and ” competition isn’t working” (and not just the Big 6 – there are around 24 energy suppliers – why exclude them?) wouldn’t it be better to put forward positive proposals?

Profile photo of wavechange
Member

Anything would be better than large companies making large profits at the expense of consumers. But why complicate the matter with profit sharing when all that’s needed is to lower prices?

Profile photo of malcolm r
Member

Any company has to make a profit to make it worthwhile for shareholders to invest in it, otherwise they will take their money elsewhere. But profits are not immediately apparent – as you see from Centrica’s results (owners of British Gas). They will depend on weather and raw fuel costs for example over a year,So a co-operative would not know its profitability until after a significant trading period.A dividend would deal with this, in effect lowering prices in retrospect, just as the old Co-op did. Not a complication at all.

Profile photo of wavechange
Member

Maybe we do need to take our energy supply back into public ownership. There is very little trust in the energy companies or Ofgem.

Profile photo of malcolm r
Member

So you trust the Government then? It has repeatedly (all parties) shown itself incapable of running pseudo-commerial venture – the Dome? Incompetence in IT projects? Purchasing in Defence and the NHS? Fire services amalgamations?

Part of the so-called “overcharging” is down to customers not taking advantage of the better deals on offer – the major change being to switch from a Standard Variable Tariff to a cheaper fixed one. We must tackle the question as to why people don’t bother to reduce their bills – give them education, help, publicity – rather than constantly demonising one side in this debate. It simply takes a look at the Which?Switch website, or a phone call, for a significant majority to see how much saving they could make.

There are 24 energy companies for us to use. Are they all colluding against us?

Profile photo of wavechange
Member

I really don’t know, Malcolm. What I do know is that there is very little trust in the energy companies. See Which? Consumer Insight, for example.

I’ve worked in education and know that that it’s not just a case of teaching people. Those who are doing the teaching have to learn a great deal about how to do their job effectively. I expect that you have encountered those who do a good job and others who are poor and ineffective at teaching.

We have to recognise that energy is essential to everyone. (You have mentioned that housing and food are equally important, but those are separate debates.) If all the data about tariffs is available so that we can use Which? Switch or other price comparison websites, why not just switch people to the tariff and supplier that offers them the best deal, unless of course a householder chooses to decline this offer?

We are in the 21st century and should be thinking a lot more about helping those who are not in a position to help themselves. I’m not demonising anyone. I’m merely supporting Which? in its efforts to ‘fix the broken energy market’.

Profile photo of ChrisGloucester
Member

Well I most definitely approve of what you say but good luck getting it to happen.
The words Turkeys and Christmas spring to mind.

Profile photo of briansg
Member

As a computer literate person who switched suppliers last year, and looked at the market after 12 months before switching tariffs with the same supplier, I have to say that I found it incredibly difficult to find the detailed tariffs on the web. Some of the comparison sites and some of the suppliers emphasised a nominal comparison rate which I found meaningless, and emphasised attempts to estimate the potential saving compared with my present tariff. (The problems with the latter comparisons have been discussed on press and TV recently). I know my annual consumption of gas and electricity and their variability, hence I want to know the future unit costs and daily standing charges for each fuel to help me decide – including the element of risk if we have a particularly cold winter and use more fuel than usual. After all, what is of importance is the difference between potential suppliers for the coming year, while the difference from the bill for the last year is an informative piece of information only.
A final curiosity, I do not believe the monthly direct debit suggested on the suppliers website when I signed up for the tariff change agreed with that quoted in the subsequent confirmatory paperwork. Fortunately, I am in a position to cope with any consequent overpayments until the real costs are revealed by future bills.

Profile photo of malcolm r
Member

bsg, I’ve only ever used Which? Switch. There, when the tariffs are listed, you click on “more information” or somesuch and it brings up a direct comparison with your existing supplier of unit cost, standing charge, any exit costs, discounts etc. I’d recommend it (although yesterday it seemed to be playing up). And they seem to list all supplers whether or not they can switch you through the site.

Profile photo of briansg
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Fair enough. But if I want the prices for a given supplier, I go to that supplier and not some intermediary who may, or may not, have recognised a price alteration by that supplier. I was doing my latest comparison during the few weeks earlier this year when suppliers were announcing price changes.

Profile photo of BobJames
Member

Referring back to my experience with First:utility I forgot to say that on every monthly bill (which is very detailed but easy to understand) the front page tells me if I am on their cheapest tariff or whether I could move to an even cheaper one. I don’t know if other energy firms do this as I haven’t seen their bills.
As regards the comments above about only getting the £200 or so reduction in energy costs once, I can’t believe that anyone would have thought it would have been otherwise!

Profile photo of Beryl
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The CMA have only confirmed what we at Which? Conversation have been saying all along that it is the vulnerable in society who have failed to switch supplier for a variety of reasons, most of which were explicitly spelled out by contributors comments on this site on a number of occasions. Time and time again on TV we heard people saying “what is the point of switching when as soon as you do, the new supplier just raises their prices in line with the other Big Six also, rendering you no better off pricewise,” undeniable evidence of tacit collusion which Ofgem admitted was taking place among the Big Six in their initial investigations. However, with the advent of subsequent intervention by Ofgem, there have been a few positive changes made regarding energy companies strategies and procedures whereby both consumers and suppliers are now able to withdraw from ‘fixed’ tariffs without penalty, subject to certain terms and conditions, and billing accounts have become more transparent and detailed.

There still remains however the question of service. Kate makes the point that complaints increased five fold between 2007 and 2013, the Big Six being the worst offenders. Service is very important to me, due mainly to the appalling service I received from NPower before switching to Scottish Power who initially were excellent but things deteriorated in 2014 when they began holding onto customers credit balances, (which I suspect assisted financially towards their new IT system) and exhorting verbal telephone tactics to discourage people from pursuing their justifiable claims for refunds. I hope the CMA will take the necessary steps to prevent these practices in the future, so that consumers will be able to make enquiries without having hassle imposed upon them.

I still have a problem coming to terms with the vacuum that exists between generation and supply prices that the CMA seem unable to enter into, but common sense tells me that if a market leader of six other select few conglomerates supplying a similar essential commodity is able set their own retail prices, safe in the knowledge that the others will automatically follow suit and in turn will keep their prices and that of their ‘competitors’ high at their customers expense is nothing short of
unscrupulous and corrupt in what is supposed to be a competitive market.

There is seemingly still much for the CMA to do to appease consumer satisfaction and restore trust back into energy suppliers but I have doubts as to whether switching is the only solution.

Profile photo of malcolm r
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Beryl, the concern is that most customers do not switch – between 50 and 80% apparently still on Standard Variable Tariffs – not only “the vulnerable”. and yet with a phone call or a visit to Which?Switch most people could immediately reduce their bills. We need to tackle this inertia – sticky customers. Education, publicity, whatever. You cannot simply blame the energy companies.

I’ve changed tariffs a number of times. At no time has my supplier raised their prices “as soon as I do”.

I guess most people will want to save money – we should focus on helping people take advantage of what is on offer. I’d hope Which/ might do that.

There are 24 energy companies – are they all colluding? We should focus on the whole market, not just the “big 6”. Most people can change to any of these companies.

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Part of the reason may be fear of the unknown, Malcolm.

I had a very frustrating time switching from e.on to Scottish Power. I think the fault lay with SP but I cannot be sure that it was them and not e.on. The whole process took a lot of my time to sort out. I should have made a complaint. I don’t relish going through similar hassle again, and I wonder how well some elderly and vulnerable people would have coped.

Expecting everyone to use switching schemes is unreasonable.

Profile photo of Beryl
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The CMA in their interim report states:

“Customers who did not switch were more likely to be on low incomes, to be over 65 and living in social housing and without qualifications. They were also likely to be disabled, a single parent and struggling financially.” That still accounts for a large section of the populace.

I have spent many years working in a voluntarily capacity with the mentally disabled, many of whom are very well educated professional people but because of their disability they are unable to adapt and keep up with everyday pressures and the constant changes taking place in modern society today.

There is no doubt that switching plays a large part in restoring some semblance of normalcy in a very dysfunctional system and no one is denying that Malcolm, but for if improvements are to be made, the whole complex structure that created the need to switch in the first place needs extensive analysis and examination before consumers are able to place any trust the market again.

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Beryl, the CMA have not yet drawn conclusions from the retail sector. However they have surveyed 7000 customers and found 50% have never switched and a third have “never considered it or thought it impossible”. People who were more likely to be in the latter category included: those aged 65 and over; those in social accommodation; those with no qualifications; and those on lower incomes.

This does not suggest that all of these people cannot switch, simply that for their own reasons they have not. I would be offended if it were suggested people in these categories were incapable.

What I have suggested is for those who are capable but don’t choose to switch we use publicity to educate them in the ease and benefits of switching. They can switch through the internet, or by phone – lack of a computer is no barrier.

I have also said elsewhere that those who are genuinely unable to go through the switching process but who want to should receive assistance to do it – throught family, charity such as CAB, or other organisations. I do not see how energy companies could be expected to hold information on all individuals that might identify them as vulnerable, unless the government somehow made it available.

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In one of the Conversations about energy prices we discussed the costs of switching energy supplier. Price comparison websites charges are met by the new energy supplier and not the user. Which? Switch charges between £15 and £45 and other sites generate up to £60 income. No doubt there are internal costs for both the new and existing energy suppliers.

All the switching costs obviously increase energy bills, including those that rarely or never switch.
It would be good to know the average total cost of a householder switching their energy supplier.

If we are to carry on with the switching system, maybe those incurring the costs pay for them. I recently switched my home insurance and the cost of setting up the new insurance was itemised. I was happy to pay that because switching has saved me hundreds of pounds.

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……………….So the more people switch the more is added to everyone’s bills! This will have a lesser effect on the larger companies who would be in a better position to sustain the extra outlay this would entail than the smaller ones I would guess and they are offering cheaper deals at the moment! On the other hand it seems very unfair on the people who can’t switch since their non-switching is also helping those that do! We already have twitchers to keep a beady eye on the avian population. Are we all now to become a nation of switchers to solve the countries energy problems? It becomes evermore Bizarre!!!

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A point made by the price comparison websites was that using their services, and charging the energy companies a fee for switching, was substantially cheaper for the energy companies than them promoting their own products through advertising. So it may well be bills are held down by PCW sites.
If you change to a new supplier directly after getting a quote from a PCW then no fee is involved, just the cost of the energy company setting up your account absiorbed into their operating costs.

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No-one is charged directly for switching energy suppliers, though the costs will be paid for by all energy users. Are we happy that those who fear every bill and sit in the cold are subsidising the costs of you switching supplier? The same obviously applies to anyone else involved in the switching game, so I am deliberately not making this a personal comment.

I strongly believe that we need to consider the more vulnerable members of the community.

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I don’t believe that the price comparison websites are effectively constraining the industry cost of switching by avoiding the need for energy companies to undertake their own advertising and promotion. Their own competitive advertising is becoming excessive [and stupider with each new iteration] to the point of discouraging people from going there.

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“I strongly believe that we need to consider the more vulnerable members of the community.”

I, and others, have repeatedly pointed out the need to help those who are unable to help themselves.

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I and others have pointed out that simple unit pricing would make it as easy to compare prices as it is to compare prices of petrol. The help you suggest is not in place, yet we have had years of confusing energy tariffs, and little seems to have changed.

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Only around half of an energy bill is actual energy. The rest is made up of transmission and distribution, green initiatives, government charges, meter reading, smart meters, administration etc. So if I am unfortunate enough to have to use 3 times as much energy as you (elderly, unwell, in all day, badly insulated rented house or I have a large family and low income – so maybe a “vulnerable” user) then I will pay 3 times as much for my energy – fair – but then 3 times as much for the rest if all the costs are bundled up into a single unit charge. It is simple, but quite inequitable.

Use a comparison site (or the phone) if you are unable to unravel tariffs and you will easily find the best deal. It is not difficult if you make the effort. For those who can’t, help them. I do.

Profile photo of wavechange
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We must have discussed this in most of the Conversations about energy, Malcolm. 🙁

The present standing charge means that those who have large houses and/or are profligate in their energy use are being subsidised by those who are small users because they simply cannot afford to keep their homes warm.

Anyone who is a large energy users for the reasons you have given should be entitled to benefits, and we have systems in place to help people claim benefits they are entitled to.

We don’t give disability benefit to those who are not disabled, so why should we allow low energy users to subsidise those who have pots of money.

Let’s show some compassion to those less fortunate than ourselves. I expect that many of those using Which? Conversation are reasonably financially secure and outside London are mainly living in their own homes. The views of much of the population may be unrepresented here, but have a look through the Which? Consumer Insight pages to gain an impression of how important energy pricing is to the public.

Profile photo of malcolm r
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I hope Which? might host an informed conversation about energy charges so we can look at the facts and decide how we think the fairest way might be to charge for energy. Maybe Ofgem could be invited to explain all the components that make up our bills, which of these are directly related to consumption of energy, which are only partially related, and which are fixed costs however much, or little, you use.

I would like to see bills that fairly reflect our actual energy usage, not ones that distort the market and give indiscriminate subsidies.

Now back to loyal customers……? 😀

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I would be interested in debating how the energy companies are spending our money on investing in the future. I think we were agreed that investment in renewable energy should not just focus on wind power.

The problem of lack of loyalty goes much further than our energy suppliers, of course. I presume that the opportunity of companies to exploit existing customers must outweigh the financial advantage of keeping them. That’s not how I would run a business.

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Malcolm: In your Feb 1st post you stated you have switched to two of the Big Six for your best price deals I.e Scottish Power and EDF who are fervently engaged in promoting cheaper deals at the present time in order to procure as many customers as possible whilst prices are lower in an ‘open and free market,’ and that makes complete sense on the surface, but anyone opting for these choices is only contributing to the status quo by keeping the smaller companies out of the marketplace and also from competing against the Big Six by enabling them to revert back to their original tactics through tacit collusion and complete control over competition and prices?

This is a typical example of the psychology of selling and dangling the proverbial carrot and the Big Six are fully aware of the percentage of potential customers who are always ready to opt for a ‘bargain.’ After all why wouldn’t they?

Time for CMA intervention to break up this very unfair practice and restore competition back into the energy market.

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Beryl, are you suggesting I should not look for cheaper deals on principle? I’d be quite happy to switch to one of the smaller energy companies if they offered a better deal. So far in my area they have not.

Do you not shop around for best deals? Fuel, food, insurance, domestic appliances and so on? I do. On a limited income I need to be prudent in how I spend.

The CMA are looking at all the facts, will report in December, when hopefully the market will be exposed for us all to evaluate.

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Yes I do shop around if I consider it will maintain fair competition in the marketplace and ultimately bring prices down, but would hopefully be aware of any dubious practice in the future that prevents this happening.

There is always the chance you may receive better service and pay a little extra of course if choosing a smaller company. As the saying goes “You pays your money and takes your choice.” Or shouldn’t that be the other way round?

Profile photo of Beryl
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Malcolm: Do you consider switching to be the only remedy to solve the energy problem? If evidence is forthcoming to prove this can work then maybe it will encourage everyone to switch and the energy suppliers and their shareholders can rest in quiet repose. If, on the other hand, you can accept there are much deeper issues that need addressing within the confines of the Big Six business practices and that consumers have been systematically exploited by unfair prices and unethical service procedures, and all the evidence is blatantly clear this to be the case, then we may see some light at the end of a very long and ominous dark tunnel.

So my answer to the above question is – No, I do not think that the Big Six deserve their customers.

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Beryl, when purchasing anything we have the freedom to choose a supplier. I am simply pointing out that as far as getting the cheapest deal for energy – if that is your wish – the means exist to do it relatively easily.

I want to hear the facts of this industry which hopefully the CMA will determine. Impartial, unbiassed and constructive information is needed so fair people can draw fair concusions.

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There are other implications with switching, especially if it involves direct debits and changes to payment arangements. Many people prefer to leave their outgoings undisturbed. Every time the banks make a payment switch there is a cost to the banking industry that is ultimately borne by customers. There are also potential complications for customers’ accounts.

I am not saying there shouldn’t be easy switching, and people should certainly do it if there is a significant financial advantage and no offsetting downsides [e.g. term, exit penalties], but as has been stated earlier by several commenters, once the big gain has been achieved most of the alternative tariff propositions offer marginal benefits. The ‘loyalty’ statistics quoted by the CMA suggest that most of the switching that currently takes place is of the quick-&-easy kind, i.e. within the same supplier, done on-line in response to an e-mail alert, and between tariffs to take advantage of new prices. The market needs enough inter-company switching to take place to keep the suppliers on their toes and there is little evidence of that at the moment. The barriers to this form of switching do need to be explored and exposed so thay can be tackled. What we don’t need is an excessive amount of unnecessary inter-company switching, which is what the price comparison sites promote, just to shave a sliver off the price which, it seems to me, happens automatically as the Big Six eventually become indistinguishable on price. It is noticeable that the price comparison websites have virtually given up on energy switching – it barely features in their advertising [thanks to Ofgem’s simplified tariff structures] – because they can make more money out of the mysteries of the insurance and telecoms markets.

It is unfortunately the fact that it is very difficult now for a small independent operator to enter the energy market unless their unique selling point is particularly apppealing to a large enough number of consumers to make the price attractive. Most of these suppliers are being progressively spun out to the margins of the market by the over-powerful centrifugal forces of the BIg Six.

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Well said John. Re-reading all the comments leads me to conclude the only workable solution is to break up the Big Six monopoly into smaller companies reducing their market dominance and introducing and encouraging more consumer choices and competition into the energy market. I am not sure about the political ramifications if this was implemented, but events taking place in May could be the deciding factor and I don’t particularly want to venture down that route.

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I find myself bewildered by almost all the above posts, between an unfortunately very small number of contributors. To me it seems extraordinarily simple, compare the offerings and choose the one that suits you.
There are apparently 24 providers so 18 are small, and their market share is growing, so no sign of the 6 large companies driving them out of business.
All the current cheapest deals are fixed for one year (or so) so why does anyone remain on a variable tariff? Especially as it gives you the security of knowing what you will pay each month.
Lets try to get as many new people to switch as possible.

Profile photo of Beryl
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Bob: By virtue of their size The Big Six are able to offer the cheapest deals. I am in the process of switching at the moment and all the Comparison Sites offering the cheapest deals for me happen to be one of the big six. As long as this trend continues most people will understandably opt for the cheaper price on offer, but this does not solve the crisis in the energy market as it will ultimately set The Big Six back on course to dominate the market once again and back to square one when they will be in a position to control prices, keeping them artificially high, ultimately at the expense of consumers.

The only effective switching remedy as far as I can see is very impractical. For example if everyone switched to a smaller independent company and paid a little more in the short term, then the big six would lose their dominance, but this realistically is not likely to happen and so people will continue to opt for the cheaper Big Six offers and so the merry-go-round continues unabated……………………..

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Well, they have NEVER offered the cheapest deal for me – I keep looking as First:utility are forever bringing out new tariffs.
I just do not understand where this silly language of ‘crisis’ and ‘broken market’ is coming from. There is a market, it is up to everyone to make the best use of it for themselves. If for someone that means that a large provider is the best deal for them then they should switch and gain the benefit. If the new smaller providers offering better deals has spurred the larger firms into responding that is all to the good. Don’t put people off switching just for a principle.

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As well as the individual being able to choose the best deal for them and switch by phone or on the net there are also collective switching schemes organised, by e.g. local authorities. You express an interest, the collective response is put to the energy suppliers as an auction, the lowest tariff is offered to participants and you can switch to it if you choose.

It beats me why such a huge number never bother to try to reduce their bills. They may not think it worth the effort – that is their choice of course.

And please, before anyone berates me for ignoring the vulnerable, I do not. I want them to get all the help they need to get the best deal for them also. As I have repeatedly said.

Profile photo of malcolm r
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Ofgem are consulting on non-traditional energy supplier models:

https://www.ofgem.gov.uk/ofgem-publications/93586/non-traditionalbusinessmodelsdiscussionpaper.pdf

On the one hand I am all for innovation. On the other hand I would not like to see effort – Ofgem’s and CMA’s – diverted from sorting out the present 24 energy suppliers to get more transparency. Don’t bite off more than you can chew. I also wonder which will benefit the most consumers most quickly?

No doubt Which? will be offering its views to Ofgem?

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Scottish Power have just received a 12 day sales ban by Ofgem for failing to deal with customer complaints.
Source BBC News.

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Member
Jack says:
21 April 2015

Ho Hum – none of you mention alternative energy companies, Ecotricity are not pegged to the Big 6, over the last few years they have consistently put their profits back into renewables. When I joined they were 40% supplying through renewables and now they are over 60%, when they can supply 100% electricity from their own sources they will stick their finger up at the corruption of the Big 6 and offer separate fair pricing. I am already paying far less than ever before – also consider investing in a local renewable company investing in supplying power to schools and houses at a very local level, if you have the luxury of being able to invest that is! There are alternatives, alternatives used to sound abit dodgy, but believe me you can ring up and speak immediately to some one in Stroud who does not try and bludgeon you with ‘offers’.

Member
joseph francis cullen says:
18 May 2017

I have just switched suppliers and have been offered a cheaper deal than the new deal. Can Ireturn without penalty?

Profile photo of duncan lucas
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No Joseph , there will be “early exit ” penalties which in your case will be the maximum amount for the year. This isn’t exactly publicised by many websites telling you to change suppliers but you should contact your supplier or read the small print in the letters they sent to you.