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Are we paying a fair price for our energy?

Fair energy illustration

Has autumn’s arrival prompted you to think about your energy bills? At Which?, we’re renewing our efforts to tackle the UK’s energy issues and have launched a new campaign to get you a fair price for energy.

Our latest research reveals just one in five people trust suppliers to charge a fair price for their energy and more than half say it’s difficult to compare the prices of different energy deals.

We found that just one in six people trust energy companies to act in our best interests, and only a quarter rate their supplier for offering them a fair price.

We think you should be able trust that the price you pay for energy is fair. With the energy market having been referred to the Competition and Markets Authority (CMA) for investigation we have launched our ‘Fair Energy Prices’ campaign to ensure changes in the market make a difference to your household finances.

Energy ‘price to beat’

We believe that people need a credible, independent benchmark – a ‘price to beat’ – against which to compare prices. Energy suppliers would compete against this ‘price to beat’, which would be set and regularly updated by the energy market regulator. This would not be a return to full price regulation and it could take a number of forms and similar models that already exist in parts of the US and Northern Ireland.

We’re calling on the CMA to investigate the best way for the regulator to establish a ‘price to beat’, so that consumers can trust that the price they pay is fair.

Simple energy pricing

We are also calling for energy suppliers to be required to use simple, directly comparable pricing, similar to petrol pump displays. The benefit of this is that people can more easily compare prices and make the best choice if they choose to switch.

You’ve been widely supportive of this in idea in the past, as Wavechange told us:

‘For me the top priority is to have simple unit pricing so that anyone capable of comparing the price of petrol or the price of groceries can see which energy company is offering the best deal.’

And Figgerty said:

‘If I use my car much more than someone with the same size car engine, I will pay more. A larger household will use much more energy and nobody is subsidising anyone if there is only a unit price.’

So how do you think a ‘price to beat’ could help you with your energy bills? Would you be more confident in having a benchmark to compare prices against? How do you judge whether you should switch suppliers?

Comments
Member

I know most of you wont agree with me here so get ready to mark this comment with a thumbs down lol…… But I a very happy with the price I pay!!

I am on a 1 rate meter (after moving from a E7 last month). I pay 16p per unit including VAT. No standing charge. No extra for not paying via direct debit & I am very happy.

I use between 7-8 units per week and have a weekly bill of between £1.12 and £1.26. I know SSE / Ebico lose money on having me as a customer as my energy spend is so low. But I don’t really care.

I do have one problem tho, I’m stuck, I can not leave. SSE / Ebico is now the only energy company in the UK to have no standing charge. This means if i look to switch i would pay over £100+ extra per year – Just on the standing charge alone.

I agree with Which?’s idea of having a ‘price to beat”. No company should have standing charges. Or each company should have the same / fixed standing charge. This way customers can just look at he unit rates & how much they pay for them. It’s a very clear system and would help people work out who they are best off with.

Member
b martin says:
12 September 2014

Since the energy market has been privatised the cosumers have been over charged and the energy systems have been exploited in order to pay ever increasing dividends to the foreign companies which now own most of the energy systems in thge U K .
The regulators need absolute power over the gas, electricity and water companies or the industries should be renationalised.

Member

It is not in the interests of energy companies to underestimate your usage which means you will be overcharged for energy that you do not use and it is up to you to claim for any credit balance but when doing so your future monthly DD payments will be overestimated to make up the deficit or you will be fined for switching to another supplier if on a fixed tariff. There is little incentive for consumers to economise on their usage if any surplus money saved is gaining interest in energy companies bank accounts so I would welcome any change that would put an end to this consumer exploitation.

A ‘price to beat’ may help to restore some competition in the energy market but I am not sure whether the comparison with petrol prices could work as it is easier to shop around for the cheapest deal whereas once locked into a ‘cheaper’ energy deal usually comes with strings attached like being fined for switching to another provider, also incentives such as discounts for paying by DD etc.

I would like more info as to how exactly this would work however. Any method that enables consumers to just pay for what they use without add-ons such as standard charges or will prevent the energy companies from introducing loopholes to override any attempts to bring fairness back into the energy market would be very welcome.

I agree it would probably need stringent monitoring by the regulator and the whole system needs to be simplified so that consumers are not drawn into deals that always work in favour of the energy companies and they know exactly what they are paying for.

Member

Well, as the wholesale price for gas/leccy is supposedly at the 3 year low, I think I’m being overcharged.

Member
'Erbert says:
12 September 2014

Plenty of comments about electricity and gas prices, no cover about those of us who have to pay through the nose for oil. No gas supply in my village means we’re at the mercy of any fluctuation in crude prices and the whims of our suppliers!

Member
BriSarn says:
13 September 2014

we moved just over a year go so do not have bills to refer to from our previous supplier of electrisity EDF so whos best to contact.

Member
Nidge M says:
15 September 2014

Your old usage data should give you enough information to make an estimate.

If it doesn’t then most utilities websites use a standard formula based on house size and occupancy.

its would allow you to make broad like for like comparisons, and you could refine that by using the potential provider site’s modelling tools by making ‘what if’ comparisons 10% above and below the predicted use.

Member

As to the question, the thing is, I feel like saying no. But I don’t always know why. The entire industry suffers from such negative perception that it’s sometimes difficult to separate the wheat from the chaff.

Member
Jack Walsh says:
13 September 2014

Of course we are being overcharged, it’s a rigged system. Firstly, no one understands the tariffs and they can’t easily be compared. Why can’t I simply be told who the cheapest supplier is for my postcode? There can only be one! No, for some reason it depends on my current supplier and what I’m paying them and how much energy I use. Why is it so complicated? Secondly, over the past three years I’ve reduced my electricity usage by over 45% but have my by bills gone down or up? Of course they have gone up by a lot. That’s not by accident The big suppliers are privatised corporations that have to report a healthy profit to the shareholders. Protected by government support and legislation. The consumer has no chance.

Member

It seems to me that the big energy suppliers are determined, as a matter of policy, to defy the laws of economics so they operate their businesses in such a way that the normal results of economies of scale – market penetration, product standardisation, customer numbers, volume production and distribution, long-term pricing for both procurement and supply – are prevented from bearing on the retail price. They are also committed to distorting the effects of competition through tariff fragmentation and terms that, while appearing to offer customer benefits, actually achieve the opposite and either lock them in to fixed prices or penalise them for opting for flexibility and freedom to cancel at will. If this were not the case there is no way they could be beaten on either price or service by smaller suppliers and new entrants to the market.

I fully support Which?’s new campaign and hope there will be an independently-formulated ‘price to beat’ against which all suppliers can be judged. I feel that before any of this can become meaningful, however, it is necessary to strip out from the bill the entire overburden of levies and obligations that interfere with the simple arithmetic of production cost + distribution cost + customer servicing cost + profit gives the retail price per unit. Various fancy wrappers could then be offered for people who pay by direct debit, want two fuels from the same company and a single bill, don’t want a paper bill, or want to commit to a longer contract. There should be no penalties [other than a nominal admin charge] for people who want to switch on grounds of price and no perverse incentives for using more energy.

At government level the nonsense has to stop – burying environmental objectives in supply obligations as a hidden tax and then taxing it at 5%, rewarding people who are lucky enough to have the right roof aspect for solar energy to the financial detriment of flat-owners, tenants, and people who cannot afford an installation, pushing smart meters onto people who don’t want them, and leaving the upgrading of the nation’s older property stock for energy efficiency to the whims of a mercenary and unreliable market.

Member
Nidge M says:
15 September 2014

Not in the interest of the Utilities to under-estimate usage?
Too right.
I moved to First Utility after protracted overcharging by nPower (still not resolved). A couple of months in and they emailed me to say my usage was about 3% above their projection and therefore they would increase my standing order by circa 10%
– Apparently this would give me ‘peace of mind’ or some such.

I replied the projected deficit’s 3%, so fine raise it 3% or tell me why you think more is justified by the data.
They raised it 3% without demur ….. but only because their decision was challenged.
How often do people let this sort of activity slide through because its too time consuming to pursue?

Member

I seem to remember that some energy companies provided products, which capped energy prices, which meant that if the price dropped the consumer got the benefit. Nowadays I only see fixed price deals. These are sold on the basis that they guarantee that you won’t pay more for the length of the contact, but don’t benefit if prices fall. A separate issue is that UK companies don’t seem to have adequate gas storage facilities, so when wholesale prices drop they can’t buy the gas and store it for the colder months. I believe in Germany they have to hold six months worth. This would be handy when it looks like Putin may turn off the supplies to selected countries.

Member

Andy, choose a fixed price energy deal without an exit penalty, and you can then switch to a cheaper tariff as soon as it appears. With your existing energy company that should take a couple of days. If you change supplier, of course, it will still currently take 4-5 weeks. You can then benefit from price falls.