Putting customers at the heart of our energy market

@gmartin, thanks George. On the ball as usual.
In a moment of sheer frustration I did write to Which? pointing out the apparent false claim of £1.6bn overcharge. In a further moment of madness I also wrote to my MP, spelling out the logic that showed how this claim appeared to be totally unjustified.

I also questioned the apparent subsidy of fixed price tariffs by SVT customers. Part of the reply from Dept. for BEIS said:
“…. This means suppliers cannot charge customers who are on standard variable tariffs more to subsidise customers on fixed price deals. Instead, fixed price deals are generally cheaper than standard variable tariffs because they require customers to manage their energy accounts online, take their own meter readings and make monthly payments by direct debit….“.

I had pointed out that, at that time, the difference in price to an average user with any one energy company, between their SVT and fixed price tariff, was between £114 and £297 a year. Savings of up to 25% of the SVT price. As the quoted average admin cost of an energy supplier is under 16% it seems ludicrous to claim that the savings are due to the reasons given by BEIS.

In response to my further questioning of this an alternative explanation was given that it was down to fixed price energy deals being based on current prices, with SVTs on longer term purchasing arrangements. There is more reason behind this argument. However, since wholesale energy costs contribute only around 40% to your bill – say £450 for an average user, I find it hard to believe that a £297 reduction could be accounted for by that approach. That would suggest paying only one third of the cost for the raw energy compared to an SVT customer. Is that credible?

I’m quite prepared to be put right on my numbers if someone who is expert produces more information. But at present I’d like to suggest that information is looked at much more critically when it is being put in the public domain. I see no reason why Which? could not have queried Claire’s numbers. We don’t want political points being made that are unsubstantiated,

I’d like to see an Ofgem switching site with every tariff represented, paid for by a levy on all in the industry. Commercial switching sites can pick and cjhoose whose offers they display, so you won’t see the whole market by any means. Ofggem could advertise this as a service, internet or phone, and customers would know it was impartial (I hope).

We have spent enough money on promoting smart meters – not only of very dubious value to consumers but costing the country over £12bn. Pity, as John says, not to publicise switching. Although I doubt the energy companies would want to do this as it would take very profitable customers away from their SVTs.

I think an Ofgem information and switching site would be the ideal Malcolm. The number of current customers would be a useful piece of additional information for me because I am wary of dealing with tiny suppliers that can just go phut! and leave us in the dark. I have gone through all the first division players over the years and dislike most of them, and now that SSE is merging with NPower this puts me in a dificulty. I need to take a closer look at the second division now and possibly go back to The Cooperative Energy although they have slipped from favour lately.

At present, those who switch suppliers incur costs that are shared by all customers including those who do not switch. That means that those who are struggling to pay their bills or not mentally up to switching have to contribute to the costs. Perhaps those who do switch should be the ones that foot the bill.

I’d suggest a significant cost is when Which? takes a payment from the chosen energy supplier when you change supplier through Which?Switch. Most suppliers seem to be on its list. I’d prefer to see Ofgem offer this service and not introduce 3rd party beneficiaries into the scheme, at our expense.

I don’t see why any individual should be penalised financially when they choose to move from one energy supplier to any other. No more than they should if they decide to move insurer, bank account, emergency breakdown cover, credit card provider, broadband, phone contract……. I suspect apart from acting as a deterrent to exercising freedom of choice many people would be up in arms about being made to pay for simply avoiding being charged too much for a product.

I can see that you don’t want to pay for switching supplier but why should much of the costs of you (or me) switching be paid for by those who don’t switch? I’m glad to see some insurers being honest and including the cost of setting up a new policy in their quotations.

Why would it then be “dishonest” not to show the cost of setting up a new account?. Should everyone we deal with, where taking our details is a part of opening an account, have to show how much that costs? This is all part of general administration costs that all business incur. If we need to communicate with a supplier, or indeed any organisation, by phone, email or letter, that will incur a cost at their end to deal with it. Should the few who do so have to pay that cost individually?

I’d still prefer a commission not being paid to Which? when I do switch through them – or any other 3rd party. Would you support Ofgem performing this service instead?

I am keen on transparency and would like to see costs shown.

I do not understand why switching services charge can charge as much as £60 for their services, though Which? Switch charges between £15 and £45, though the reason for this wide range is not explained.

What I would like is energy pricing that is sufficiently simple that anyone can compare prices from different suppliers without needing to use a computer or phone service to do the job.

Using Which?Switch is simple and gives you all available offers in ascending order of cost (based on the estimated usage you input).

My approach is to use the service and then go to my chosen energy supplier, which arranges the transfer. I don’t want other people paying for me using a switching service.

Peter, unfortunately the cap, as far as I know, is only an example for the customer who uses the “average” amount of energy on a dual fuel tariff – 3100 units of electricity and 12000 of gas – an Ofgem “medium” user. I presume if you use more than that the cost will be pro rata based on the capped tariff unit charges.

The cap is to help protect those on expensive standard variable tariffs, Peter. These include many who don’t engage with the market including many who cannot cope with financial matters. It will not help those of us who keep an eye on prices and move to cheaper fixed tariffs.

I wonder what the critical mass in terms of customer numbers or quantities of energy supplied is for a viable energy company. If low tariffs are the chief appeal then the reduced income will not sustain the operating overheads and the margin on energy costs will become too tight if wholesale prices move upwards.

I think that’s why a lot of well ‘orf folk don’t ever switch.

But bigging up this issue helps our Government give the illusion that it actually gives a stuff about helping the poor and needy.

@gmartin, still no news George?

Thanks George.