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Why cutting the price of energy really matters

Fair energy illustration

‘I’d like to use my heating in winter and not just when people visit.’ That was only one of many comments we’ve had from the more than 203,900 of you who have signed our petition for fair energy prices.

This week the Government has written to the Big Six energy firms asking them if energy prices accurately reflect their costs after falls in the cost of wholesale energy.

Our analysis suggests standard variable energy tariffs have not kept in line with wholesale prices over the past two years.

The stories you’ve shared make it clear just how urgently action is needed. Here are just some of the comments from people who’ve told us how energy prices affect them.

Why cutting energy bills matters

Helen, from Southampton, said:

‘Gas and electricity payments represent over 17% of my income. I have a one-bed flat, do not own a TV, radio, toaster etc. and still my bills are too high for me to keep up with. I’d love to be able to shower and do the washing up every day, I’m terrified of the cost, so I don’t. How families with young children manage is beyond me.’

Garth, from Basingstoke, said:

‘I am retired and prices seem to rise at a greater rate than my pension.’

Alan from Blackwell told us that while he felt he was ‘a reasonably sophisticated consumer’, bills are incomprehensible and comparisons ‘nearly impossible’.

Kathryn, from Sheffield, said:

‘Although we check our prices every year there are a lot of older people who do not have the internet access we do and find it too hard to get the comparative information.’

What we think should happen

energy-billsWe did our own analysis of wholesale costs and energy bills earlier this year. We found that UK bills could have been £2.9bn lower over the last year (£145 per household).

We think it’s good that Ministers are acting, but we now need to see suppliers do the right thing and fast. Energy firms have totally run out of excuses for not cutting our bills. If they don’t play ball it will add weight to the case for the Competition and Markets Authority (CMA) to step in and force the energy firms to make bills fair.

The CMA is currently undertaking a wide-ranging investigation into the energy market to see if competition is working properly.

The Government’s Energy Secretary Amber Rudd said her focus is to get the best deal for consumers and the department is working hard to keep energy bills as low as possible.

How are energy prices affecting you? Have you switched suppliers and has this helped keep costs down?

Comments
Member

To quote from the CMA report: “The survey results suggest that there is a material percentage of customers who are disengaged in domestic retail energy markets. The survey results also suggest that those who are have low incomes, have low qualifications, are living in rented accommodation or who are above 65 are less likely to be engaged in the domestic retail energy markets against a variety of indicators of engagement. For example, 35% of those whose household incomes were above £36,000 had switched supplier in the last three years, compared with 20% of those whose household incomes were below £18,000, and 32% of those with degree level qualifications had switched in the last three years compared with 18% of those with no qualifications.”

I am not surprised to read this. Those who don’t switch for whatever reason are subsidising those who regularly switch to lower their energy charges. I would like to see stability in energy pricing so that those who – for whatever reason – do not keep an eye on energy pricing are not disadvantaged. There’s far too much of an ‘I’m alright Jack’ attitude in this country.

Member

I see no reason why we need standard variable tariffs and fixed price tariffs (which effectively ask the consumer to guess at future wholesale energy cost changes – something they are in no position to do in an informed way). So back to basic tariffs that are linked more directly to costs, and that do not give such large differences. I was, and still am, in favour of of the previous selection of tariffs: unit cost plus standing charge, two tier tariff where the first units recover fixed costs, and unit-only tariffs. The consumer can then choose which tariff suits his consumption pattern best. No doubt consumers will need active help from someone – their energy supplier for example – to suggest the most appropriate tariff for them. Or maybe you don’t actually choose a tariff – just a supplier – and at the end of each year your supplier simply calculates what your best tariff would have been and gives a rebate if necessary.
Nonetheless, some consumer involvement is necessary – just like choosing a best buy in any commodity. Perhaps a national independent price comparison site which checks your usage with your existing supplier and suggests your best deal. You still have to engage to some degree – we can’t do anything without a bit of effort, can we?

Member

I am not convinced that consumer involvement should be necessary to deliver an essential service such as energy.

I don’t think my three nearest neighbours are engaging much at the moment. One lost his wife a couple of years ago and has not got over it. He put up his house for sale at Easter, having realised that he cannot cope with the large gardens on his own. It was sold yesterday and now he has to move home to be nearer his son, and have necessary modifications carried out. The second neighbour is preoccupied with his wife, who is now in the third hospital, still partially paralysed as a result of food poisoning more than two months ago. The third neighbours have not got a clue about anything financial, though they have been wonderful parents and extremely helpful to me and others.

There is absolutely no reason why anyone should have to shop around for the best energy price in a civilised society. At least with food, many basics are sold at much the same price, at least in the main supermarkets.

Member

How then do you suggest we provide energy? No competition at all – everyone charges the same? Food is just as essential as energy – do we not shop around for that either? Some items are advertised at matching prices but the overall trolley will vary from shop to shop. And overall it probably costs 4 or 5 times the price of energy.

Member

All companies charging the same would certainly make for a fairer society, Malcolm. The more astute could choose their supplier based on how different energy companies are run, for example a sensible approach to renewable energy, customer service, clarity of billing and so on.

As I said above, many food basics are sold at fairly similar prices. The Which? super-complaint may help to put an end to put an end to practices such as pushing up the price of single items to offer a discount on multi-buys. I’ve given the example of Tesco selling one cucumber for 90p and two for £1 when the usual price is 49p or less for a single cucumber. We really need to think about people who don’t have much money.

I’m only concerned about essential goods and services. With luxury goods and non-essential services I have no problem with competition and haggling.

Member

“The more astute could choose their supplier…” The evidence is that most people don’t bother. Charging the same is likely to be anti-competitive – again, the last thing we need. We had that with nationalised industries – it didn’t work in the consumers interests.