/ Home & Energy

What does loyalty mean to you and your energy company?

Customer loyalty

14m of you are on a standard tariff with one of the biggest 10 energy companies and over 8.5m have been on that same tariff for more than three years. You’re loyal to your supplier, but what do you gain from this?

Last week energy regulator Ofgem published its annual data showing the numbers of customers on different types of energy tariff with the biggest gas and electricity companies.

This showed two thirds of energy customers are on poor-value standard tariffs. They’ve stayed put despite it sometimes feeling impossible to avoid the constant prompts about switching supplier and saving money. Whether it’s comparison website messages plastered across buses, singing to us from the TV, notes on our energy bills asking ‘could you pay less?’, these blog pages or our very own Which? Switch website, you seemingly can’t avoid this sound advice.

Steadfastly, some of you remain loyal to your energy supplier, through thick and thin.

How you pay for your loyalty

Not only do you pay for your loyalty in your hard-earned cash – Npower’s standard tariff currently costs £355 more than the cheapest deal on the market – you can pay in terms of poor customer service too.

Energy was the second lowest-scoring sector on average for customer service in a recent Which? investigation. Of 100 big everyday brands included, three of the Big Six energy firms finished in 90th place or below, based on their customers’ feedback.

Your energy firm loves your loyalty

Stay a customer for years, fall off a fixed tariff when it expires (if ever you were on one) and sit comfortably on a standard tariff. Stay put this autumn and watch your bill go up, following price rises in the spring and summer and needing to heat your home over winter.

Standard tariffs are rarely energy suppliers’ cheapest deals. Since they’re the default or ’out-of-contract’ option, they’re where you’ll automatically end up if you do nothing. As long as you do that, you’ll be paying a premium for the same product your supplier is selling to more on-the-ball customers for potentially hundreds of pounds less over a year.

Put simply, a loyal (disengaged, or sticky) customer can mean extra cash to an energy company.

Make loyalty work for you

This doesn’t have to be the case. As a consumer you can prevent yourself losing out through loyalty, while some energy firms are looking to do more to reward their loyal customers.

Comparing energy prices and switching tariff is the place to start as an energy consumer, to reassure yourself you’re not overpaying. Stay loyal and still save by making sure you’re on your supplier’s cheapest deal.

Are these tactics for rewarding loyalty?

  • Pricing the standard tariff and cheapest deal the same: a couple of suppliers have done this, meaning you’re not losing out by being on the out-of-contract tariff.
  • Customer rewards programmes: most recently announced by British Gas, some (often bigger) suppliers can offer discounts and deals for existing customers.
  • Making pricing more transparent: start-up firms are promising their prices will track the wholesale cost of energy closely to restore confidence in how their charges are arrived at.

Are you loyal to your energy company? What does it – or what should it – do to keep you loyal?

Comments
Guest
bishbut says:
6 September 2017

Some do not care about how much they pay for anything !Some cannot be bothered to do anything at all to save money Some are too ignorant to heed any advice Some will not listen to any advice they think they know better Some get advice from the wrong people or place A large number do not read Which or even know of it’s existence with many people whatever you do you just cannot win Is WHICH wasting it’s time giving advice ?

Guest

E.on have written to me to remind me that my contract will end next month and if I take no action they will transfer me to their standard variable tariff and thus charge me significantly more. Like other energy companies, they have kept me well in credit despite the fact that I have a smart meter and could charge me for the energy I use.

I am a low user and will switch energy supplier, but we need action to stop companies transferring customers to expensive tariffs if they take no action. I know people living with cancer and other health problems. They do not deserve to be exploited. Please put an end to this nonsense, Which?

Guest

There is an astonishing and shocking statistic at the start of this Conversation : “14m of you are on a standard tariff with one of the biggest 10 energy companies and over 8.5m have been on that same tariff for more than three years.” That’s not fourteen million people out of a population of over 65 million, but fourteen million households out of a total number of households of 27.1 million in 2016. Let’s ignore second homes and properties where someone else determines the energy supply.

That number must include some intelligent, knowledgeable and well-informed people, so this message isn’t getting through even at that level, let alone to people who, for whatever reason, just cannot engage with the idea of switching or are concerned it will go wrong [and that is another problem that energy companies have created].

Surely it is time for compulsory action to ensure that, as a minimum, the standard tariff and the cheapest deal are priced the same by every energy company [the first of the suggested tactics outlined in the article]. Apart from anything else it will make comparisons much easier by reducing the options.

I would also support the elimination of the fixed-price fixed-term tariffs that are effectively subsidised by those on the standard tariffs. Malcolm has frequently pressed for this but there has never been any acnowledgment from Which? that it might help or an explanation of why it might not be the best policy. I am tempted to conclude that Which? has a conflict of interest by running a comparison website that attracts commission [from the energy suppliers] arising from its use since there would be a large drop in use of the site. Which? Switch is a good site, better than the others in my opinion, and it works well, but it should not cloud Which?’s judgment on tariff policy.

Among the 14 million households there must be many Which? subscribers and readers of Which? Conversation, so the question has to be asked: is lecturing and hectoring consumers the best way to resolve this problem or is something more direct, forceful and beneficial, aimed at the source of the problem and not the poor confused consumers, now required?

The other major unfairness is entirely within the government’s purview, and that is the various policy oncosts that are applied to bills to pay for various renewable energy subsidies and the smart meter programme – which is increasingly regarded as an exorbitantly expensive but limited-value exercise during this time of austerity. These overburdens on our bills, which attract VAT on top, are regressive because they bear disproportionately heavily on people on low incomes and on those who have to maintain high or continuous levels of heating [applying to both categories in many cases]. These costs should be transferred to general taxation so that they are charged in a more equitable manner. The government [every government] always ducks this issue when grandstanding on the need to curb energy bills.

Guest

I agree that it would be good for the standard variable tariff and fixed tariff to be the same. The latter would allow customers to protect themselves from price increases, albeit without benefitting from any price decrease.

Guest

If the exit penalties are not too onerous it might be worth while to switch from a fixed-price fixed-term tariff to another one if there is a significant drop in prices. It will depend on the customer’s consumption profile and the duration of the term remaining.

Guest

I doubt “loyalty” is what this is about – it is lethargy. Most people have busy lives and this is just another task that many avoid. Why? A lengthy report found that for many people the savings they would make were insufficient to prompt them into action. As John rightly says, many on standard tariffs are clued up as to what they do, but not bothered enough to change.

I have many times asked Which? to look at why fixed price tariffs are so much cheaper than standard variable tariffs; the difference cannot be accounted for by the apparent claimed “administrative” savings. So the thought remains that they are subsidised – by those on svts – as a way to attract new customers for a year who then keep switching. So what is the use of them? I would scrap them, make svts the norm, and reduce their cost accordingly.

Reward programmes? I don’t want these; I want straightforward prices.

Tracking wholesale prices? I thought in general tariffs did. But bear in mind what we mean by “wholesale prices”. The larger suppliers buy energy maybe 3 years ahead to help provide stability to their costs. Smaller companies may not have the means to do this, and rely on short term pricing which can be volatile. If their tariffs are such that they become unprofitable when costs rise in an unexpected way – a world “situation” or bad weather in the USA for example – they might not have the resources to be able to cope with it and succumb, as happened a couple of years ago.

We should boil energy down to its basics – wholesale costs, transmission costs, administration and profit (plus vat regrettably – although when we leave the EU this could be removed – but most unlikely). That is what the energy companies should be asked to charge us for, then we can see what we are paying for. All the government “extras” should be paid for out of taxation – John and I agree I think – and these are set to add another £100 to a typical bill, so are a significant part of our expenses.

Which? ask some questions, but I’d find it more helpful if they would look at comments made extensively in their Convos, and piece together a real proposal for future energy pricing.

We focus on energy as it seems to have been made an emotive topic. However, with an average food bill likely to be around 2.5 times as much, and rent between 5 and 18 times an average energy bill, perhaps those deserve equal or greater attention. It is far harder to change landlords than your energy supplier.

Guest

I agree with all that, Malcolm.

Wouldn’t it be nice to have some response from Which? Then we could call this a conversation.

Guest
kel meler says:
6 September 2017

This is my 5th year of changing energy suppliers. Loyalty to them went out the window many moons ago. How loyal were these companies to their customers during the austerity period, they were not interested that people were struggling to afford energy they just kept on upping their prices at regular intervals, you as a customer just had to take it. The outcome for me loyalty NEVER.