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Energy deals shouldn’t be this complicated

Call centre staff

We’ve launched our third investigation into how energy deals are sold over the phone – energy companies are getting better at offering us the cheapest tariff, but are still struggling to give us accurate quotes.

We rang up the six major energy companies twelve times over the course of a week in November 2012 and asked for a quote for their cheapest deal. Putting aside some of the strange prices we were quoted, what struck me most is that it still feels far too complicated to work out the best deal.

Even after analysing fifty or so of these calls, I was still discovering new jargon and an array of discounts that I didn’t fully understand, from paperless billing discounts to Nectar points as a ‘thank you’. I was also left bamboozled by the subtle differences between unit rates and standing charges that many salespeople listed at the end of the call.

Struggling with the sums

Two of the most striking calls were when salespeople tried to figure out a quote for us using pen, paper and a calculator after their computer system went down:

‘So 15105 x 0.0374 is 565 just about. Right 365 days at 29.616, this can’t be right, that’s £2,000, that doesn’t make sense, try that again. 565,365 times 0.29616, put a point in, it might make a difference. Right £108 that makes more sense. Right so gas would equate to 673, that’s without VAT. VAT at 5% would make that 6, £700 more or less.’

When you see the professionals scratching their heads and performing some seriously complicated maths, it does make you wonder – does it really need to be so confusing?

The answer is… simplicity

In November 2012 we did an investigation that showed that only 8% of people could work out the cheapest tariff when presented with six different energy deals. It’s hardly surprising that most people don’t even bother trying to find out the best deal for them, even though some could save hundreds of pounds a year.

That’s why we are calling on the government to ensure that prices can be easily compared at a glance, like on petrol forecourt displays. A single unit price would allow people to find the cheapest energy deals with ease.

At the moment, the maths just doesn’t add up. It’s time to simplify the process and cut down the jargon, so that we can all have clear, easy-to-compare gas and electricity prices.

Comments
Member

I am at a loss to understand your remarks under the heading ‘struggling with the sums’. Are you being deliberately obfuscatory or just ignorant ?
Referring to the details quoted the following is obvious-
15,105 is the estimated kWh consumption for one year; £0.0374 is the cost of 1kWh of gas, hence15105x0.0374= £564.93 gives the cost per year of the gas cosumed. 29.616p or £0.29616 is the standing charge per day, hence 365x£0.29616=£108 per year.Adding£564.93and £108 gives a cost of £672.93 for gas for the year. Bearing in mind that this is only an estimate it would be true to say that the future gas bill will most likely be between £700 and £770 allowing for the inevitable price rises.
In future I reccomend that you chose one of the more complex tariffs to youse as an illustration.

Member

Most call centre staff, irrespective of their industry, would be in deep trouble if their computers went down. Try getting an insurance quote from anyone without the computer for them to play with.

Obviously you record the phone calls but I’m slightly puzzled by the point of it all.

Member

This topic has been thrashed to death already. There is no agreement among previous contributors as to whether you should have standing charges or not, dual unit charges or not, so why go through all this again? It seems like Which? has one agenda regardless of other opinions.
Given unit charges and standing charges and a record of your kWh consumption it really is not beyond most people to work out the cost, or have someone help them or use a comparison site.
Forget Nectar points – they shouldn’t be a factor in choosing a deal.
I’m all for having a very small number of options, that is sensible. What is not sensible is oversimplifying just for the sake of it.

Member

I support what Which? trying to achieve. Although I don’t find it hard to do the necessary calculations, I respect that many people will find them difficult. We should consider others.

I am strongly opposed to the standing charge on principle, because it means that higher users pay less for energy. We need to do what we can to conserve energy.

Which? has suggested (again) that domestic gas and electricity prices should be as simple to compare as petrol forecourt displays. That’s fine for me. I’m not aware that any company selling petrol has suggested we pay a standing charge to help cover the cost of delivering fuel, the cost of the pumps and paying the staff running the filling station. Getting rid of standing charges will certainly help towards simple, easy to understand pricing for everyone.

Member

The energy companies have significant fixed costs and the issue is whether all users – big or small – should make a fair contribution to this infrastructure. I believe they should – others may disagree. The system at present allows the larger user to pay a substantial amount towards this fixed cost by way of a standing charge. A small user may choose not to pay this charge, but instead opt to pay a higher unit rate that helps recover some of this – but for a very low user the contribution is small. You could argue that the larger user is subsidising the smaller user by paying more towards the infrastructure.

It is misleading to say that the larger user benefits from paying less for energy – they are simply paying separately for infrastructure and energy. The smaller user has these costs combined into one charge.

Whilst many of us conserve as much energy as possible there are many who use significantly more energy than others for unavoidable reasons that do not need repeating. They should not be penalised.

Ay present the user has a choice – you can pick the tariff that gives you the lowest bill. Surely such a choice is reasonable.

There is no black and white answer here. Oversimplification can be counter-productive – choice is what consumers should be given.

Member

Why should the infrastructure cost be divided per customer and not per unit of consumption? Do it the second way and you have the same marginal price at every level of consumption, which is a simple tariff and does not give large consumers a lower incentive to save a unit than small consumers. Infrastructure in the form of pipelines, cables and the like is equally utilised by each unit. Billing systems and so on are a per customer cost but in an efficient organisation should be relatively small.

Member

Because in a given area it costs just as much for the infrastructure to provide a low and a high domestic user.
It is a fallacy to suggest that larger users have a lower incentive – energy is expensive for all of us and I for one do all that is reasonable to minimise my consumption and bills. The present system allows consumers to choose the tariff most appropriate to their needs. You can work out which supplier and which tariff givers you the lowest estimated annual charge and opt for that.

Member

Why work out anything if we can simply compare the price per unit? Supermarkets provide unit pricing to help those who can’t do mental arithmetic to compare prices.

Though I am keen that we should all be able to handle calculations, not everyone can. Is there anything wrong with what Which? is trying to achieve?