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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 ?

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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?

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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.

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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.

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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.

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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.

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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.

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Guest

Most people want straightforward prices and don’t want to have to spend their very precious TIME fiddling around comparing providers’ promises and then having the bother of changing and all that can go wrong – and still does . Fine perhaps if you have nothing else more interesting and satisfying to do. However the Government dogmatically still insists that competitive everything is the only way to go that is full of marketing tricks and wheezes which a lot of us hardworking families can quite frankly do without (to put it politely)! What about the monopoly that still exists? Why can’t they make that work better?

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Guest

I hear what you say, but we have switched two accounts for several years when it has been beneficial using Which?Switch to compare prices. I’ve saved quite a bit of money, and the comparison process is fairly quick to do and worthwhile, given the money involved. This year I’ve paid 8.74p for electricity and 1.6p for gas. Regrettably it comes to an end next month and I cannot find a tariff near it, so it will be looking for the best fixed price deal but probably avoiding the new “start up” opportunist suppliers as I don’t think they are financially sound enough to trade if the market becomes volatile (as it might do if Asia deteriorates).

Guest
Roger Barbour says:
6 September 2017

I agree wholeheartedly. Why should I spend hours every year changing suppliers and checking that the direct debits are cancelled and set up and money owed has been refunded etc etc – for exactly the same product – electricity? I have got better things to do with my life.

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Guest

“I have got better things to do with my life.” I have too – and the money I save by switching helps me to pay for them.

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Guest

Roger, it takes me less than 10 minutes to find the best deal with Which?Switch and then not too much time changing suppliers, all for a worthwhile saving. I’ve never had a problem with refunds or direct debits. If you can save £100 for even an hour’s total time, tax free, it seems well worth it to me.

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Guest

I’ve had problems switching. They muddled meters and meter numbers. But what about elderly people or those who are just not tech-savvy? I cannot see the benefits for everyone of this so-called competition for exactly the same product!

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Guest

“I cannot see the benefits for everyone of this so-called competition for exactly the same product!” The problem I foresee is that, over time, removing the competition would result in higher prices for everyone.

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Guest

Which?Switch can do a comparison by phone. You don’t have to use the internet.

It might be all electricity and gas, but it is bought from different sources, at different prices, and in different ways such as forward buying. So costs will differ giving real competition.

Guest
Møhåmæd Øthmåñ says:
6 September 2017

It’s very good

Guest

I have recently bought my previously rented flat and have been trying to change from and end my energy supplier Spark. Recently they sent me yet another final bill in which they appeared to have charged me twice for the same period of gas. When I rang up to query it they said they would recalculate my last 2 years bills. I thought this would be good as their bills have been consistently exortortionately high for the small flat I now live in . However now they have told me i actually owe them over £900 . I have paid direct debits regularly plus huge excesses at the end of each year- the total being much more than the large old house i have downsized from- so i am at a loss as to how i can be owing them anything. I am at my wits end. Where and how do i start to disprove their new recalculated bill? Can anyone give me some advice please. Fiona

Sent from my iPhone

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Guest

Hi Fiona,

Here are a couple of things you may want to check:

Do spark have the correct gas meter serial number associated with your property? (My house was originally linked to my neighbours’ meter, so I know mistakes can happen…)

Do you have all you meter readings, from when you moved in to now? If so, it ought to possible to agree how much gas you really have used and how much you owe. Accounts for rented properties seem to be horribly prone to the illegal malpractice in which new tenants get assigned debts left by previous tenants – you may want to check that this has not happened in your case.

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Guest

Have you been supplying regular meter readings in the old house Fiona? If not the energy company will estimate your usage. This will be revealed to them when you supply the final readings when leaving and if they have been underestimating your readings over a 2 year period then I’m afraid you will be expected to repay the deficit.

Tenants have also been known to tamper with meters. Just a thought. I hope you get it sorted soon.

Guest
petejay says:
12 September 2017

What would you say if I held you up and robbed you of £300 every year? No, worse than that just hand over the money every year. You might be really peed off. (sorry).
Well, that is what is happening right now to you if you do not keep an eye on prices.
Select the next wet morning and do nothing else but check what is going on out there.
Compare the KW/hour prices in each company. Check the iniquitous standing charge.
Forget everything else. Just click.
Just do it. Please?

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Guest

Better to use Which?Switch, put in your annual usage of electricity and gas and find a long list of predicted annual bills in ascending order of cost. If you are new to this, less than 15 minutes should give you the information you need.