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Are you on a standard energy tariff?

Money and gas flame

Are you on a pricey standard gas or electricity tariff? Millions of people are paying more than they need to for their energy – and they’re often the most vulnerable.

The Competition and Markets Authority’s (CMA) investigation into the energy market is reaching its final stages. So as part of our Fair Energy Prices campaign we’re calling for further action to tackle the millions of people who are paying over the odds on expensive standard tariffs.

Millions stuck on expensive tariffs

We’ve looked at the Government’s latest switching data, and it conclusively shows that switching levels over the past two years haven’t reduced the number of people on standard tariffs.

Approximately 21 million electricity and 16 million gas customers were on standard tariffs at the beginning of 2014. Has this improved since recent reforms which forced suppliers to reduce the number of tariffs and show their cheapest deals on bills? No.

The number of customers on standard deals is almost exactly the same today. That’s around three quarters of all energy customers paying more than they need to. It was too many people in 2014 and it’s too many people today.

The cost of not switching

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Why does this matter? Well a standard electricity tariff costs on average £54 more than other deals per year, and a standard gas tariff is an estimated £75 more a year. That’s a fair chunk or money, but it’s not fair on energy customers.

In short, the number of customers switching has stayed pretty static. You might be a regular switcher and engaged in the market, but millions of people aren’t. And these people are often the most vulnerable. People like Lesley from Pembrokeshire:

‘I have very little money that needs to stretch far. I would like to use my heating in the winter, not just when people visit. Put the oven on to cook, not just for others. It’s hard having no money and trying not to worry others.’

Action needed from the CMA

With switching rates so stagnant, we need the CMA to use its long-running inquiry to ensure that many more people are confident to switch to better deals. It also needs to take action to protect vulnerable customers from paying over the odds.

So when the CMA reports back in June next year, we want to see it:

  • Tackle the number of people on poor value standard tariffs
  • Make it easier to compare and switch through simple pricing
  • Penalise suppliers who fail to protect the most vulnerable customers

Do you regularly switch energy deals? Do you struggle to pay your energy bills, or know someone who does?


Comments
Profile photo of bishbut
Member

Some people will not know they can, some cannot be bothered, some seem to me to have a lot more money than sense, what anyone else says or tells them they will not listen or take any notice of what is said. There are a lot of ignorant and stupid people in this world.

Profile photo of malcolm r
Member

“Millions of people are paying more than they need to for their energy – and they’re often the most vulnerable.”
“Approximately 21 million electricity and 16 million gas customers were on standard tariffs”
The CMA report says that most people on standard tariffs were capable of changing but chose not to bother – sticky consumers who did not engage with the market. The incentive of making a change for a couple of pounds a a week was not a sufficient incentive.

I suggest getting rid of fixed-price contract tariffs and simply having a new standard tariff and probably an off peak, with tariff structures to suit both low and higher users. Then switching will just be between suppliers. Your choice may be gas and electricity from different suppliers.

I do not see the point in having multiple price comparison and switching sites – just costs money and may influence choice. I’d like to see a national site – possibly under Ofgem’s supervision – where you can compare every tariff and where you can switch.

Profile photo of wavechange
Member

We did not need a single switching site before privatisation. Unless I am mistaken, not many of the vulnerable people are switching, and they are the ones that are being exploited by the present system.

Profile photo of malcolm r
Member

If we do not have a situation where every energy supplier charges exactly the same – and we won’t – then we need to make price comparison and switching providers as easy as possible.

Profile photo of wavechange
Member

Which? proposed that we had simple unit pricing a couple of years ago. That means that you can compare prices as easily as comparing the price of petrol or loaves of bread.

If price comparison is any more complicated, then we don’t need it.

Profile photo of malcolm r
Member

The Which? proposal was flawed, both on its analysis and on the practical outcome. I hope no notice is taken of it as it will disadvantage many vulnerable consumers and benefit many well-off ones. That is why I proposed tariffs that are appropriate to both groups, so no one is discriminated against in an unintended way.

Prices will not be complicated with such tariffs. What we do not need is unfairness in the name of so-called “simplicity”.

Profile photo of John Ward
Member

Tariffs were not uniform under the nationalised industries. Switching wasn’t possible though because each regional Gas or Electricity Board maintained its own infrastructure and usually made its own gas or generated its own electricity and the law at the time did not allow for people or commercial customers to have a supply contract with a Board outside their own region. At least privatisation has opened up choice even if computerisation has facilitated the salami-slicing of tariffs which seems to be the main bugbear now.

Profile photo of John Ward
Member

In line three above, I should have written “distributed its own electricity” because under the nationalised structure most electricity was generated by the Central Electricity Generating Board which operated the power stations and ran the national grid. It sold power to the electricity boards which acted as distributors.

Profile photo of malcolm r
Member

According to Ofgem the privatised distribution systems operate more cheaply in real terms than did the nationalised ones. Around 30% if I remember the figure correctly.

Profile photo of John Ward
Member

Yes – the nationalised energy suppliers were notoriously inefficient and wasteful and they oversaw the generation of electricity and the production of gas by the dirtiest processes imaginable; they were also at the mercy of the railway and coal mining industries for their raw material. It was only the development of nuclear energy and off-shore gas that brought about any desire for modernisation.

Obviously if privatisation was reversed and the state bought back the assets the new structure would inherit modern plant and systems, but the ancient operating culture would soon embed itself again. It would be a courageous political move to try it out.

Profile photo of wavechange
Member

It’s generally recognised that competition is beneficial but following privatisation, buying electricity and gas has become extremely complex. I would like to see the competition elsewhere in the energy industry so that the consumer can benefit from competition, yet still have simple pricing, so that everyone can benefit from fair prices.

Profile photo of John Ward
Member

I agree with that. I think Ofgem is still way behind the curve. There are still major problems with customer service at certain energy companies despite regulatory intervention and penalties, but they’re still merrily trading away. Other companies have lost huge numbers of customers but don’t seem too worried about it. A really smart meter would let me change the supplier and tariff directly as the prices change and the bill would come from a ‘clearing house’.

Profile photo of wavechange
Member

I have not seen a recent figure for the cost of running Ofgem, which is indirectly paid for in our energy bills. I do not know the extent of their regulatory powers but I am disappointed that we still have very complex pricing.

Member

I’ve been switching for the last 4 years it has to be done otherwise you really are losing money and the energy company will be more than happy to fleece you.

Profile photo of Marcus
Member

The elderly are particularly penalised because they often don’t use the internet and have no access to full-market deals that this gives. They may also simply be confused about the whole business. I switch my parents as necessary, but as they’re not interneted, my father has dementia and my mother is a busy carer for him, this wouldn’t otherwise happen and they’d be paying over the odds from meagre pensions.

I don’t believe privatisation of the utilities has benefited customers on the whole – it’s just caused confusion and extra work.

Member
Derek Ray says:
5 November 2015

Inertia is encouraged by uncertainty. Which projects me saving £400pa by switching from EOn to small, new supplier GB energy. Another site puts the saving at £140. Reviews of new such suppliers (not this one, too new) rail about poor billing, unanswered help lines, erratic usage assessment. So is Which part of the problem? Encouraging buyers to switch this way, then that way, with the best buy usually an obscure new player ? The writer above manages well in this milieu – is he maybe the skilful exception?

Member

Applause!!! Very well put. Agree.

Profile photo of RichardScott
Member

I change suppliers regularly, and I offer advice to friends and family on all aspects of saving energy.
As a retired scientist I have carried out a project on saving gas, electricity, water, petrol and diesel. I have a solar hot water system, and am experimenting with solar mirrors to reflect heat and light into the house. I produced a short report on my findings – sending copies to friends, family, MP`s, and organisations which assist the elderly. The main problem is that some people do not take any notice of my carefully researched and measured findings, as many are resistant to any change, finding it difficult to switch.

Profile photo of HowardRichards
Member

Having been retired for 6 years, I am aware that many of my generation do not use the internet or are not confident enough to go searching through the sometimes overwhelming range of tariffs, length of contracts, cancellation fees, etc. Yet they are the often the most vulnerable on low incomes and may not have anyone to help them through the system.

Profile photo of John Ward
Member

I tend not to switch suppliers but do take advantage of the facility to switch tariffs within the same supplier as better terms become available. On balance I find that to be a satisfactory situation as, although I cannot always claim to be on the best rates at any one time, over time these tend to align themselves and a tariff switch is free, easy, quick and instant with no worries about double billing, getting refunds, misdirected direct debits, and other complications.

Somebody said in a previous Conversation on this topic that you only make a big saving once, and I think that is fairly true. I suppose if everyone quit the standard tariff the prices on the other tariffs would have to go up to rebalance the profit and loss account. Is there actually a need for a ‘standard tariff’? – it’s really just a default tariff for penalising people who cannot or will not choose a tariff that is more suitable for their particular consumption patterns and payment preferences. The fear of misselling has made it impossible for the energy companies to place customers on what they consider is the most suitable tariff and to adjust it in line with experience. To be honest I wouldn’t trust them to do that properly at the moment so it’s a thorny problem.

Member

I hope this fairer fuel bill prices IS what it is, and isn’t a fastrack (via a stealth blanket/backdoor campaign by proxy technique), to push the pending bill/legislation which is for the implementation of the so called “Smart Meteres”, which people should know ARE causing huge concerns across the USA who already have them, and are raising much concern over the meteres radiation and electromagnetic frequencies which is said to cause negative effects on the human body. Headaches, nausia, nural damage, and other brain related issues!nto

Profile photo of DerekP
Member

My expectation is that UK smart meters will be regulated in their use of any wireless technology, just as other home wifi devices will be.

So far, the only ones I have used “phone home” via the power lines and use domestic wifi systems to communicate with their portable display units.

Profile photo of MTHULME
Member

it’s simply too much trouble for a lot of people to check and change

Profile photo of B.Musgrave
Member

A good petition but in the end nobody will listen or do anything

Profile photo of rogmull
Member

Soem people will not want the cheapest, but the cheapest green supplier which is different. Which needs to cater for both types of users in the surveys.

Member
Bob p says:
7 November 2015

Talking about standard rate prices can anyone explain why people on a key meter for electricity & there must be thousands especially people who work on a very small amount of weekly money can only get the standard rates. For people who do not know it is an up front payment before any energy is used & the company are paid knowing in advance what each household is using as do the house holders. When payments are paid upon charging the key receipts are given, when the key is inserted the amount is again shown, also the meter shows what amount is left to use. But for upfront direct payment the cost is set high per unit, & if anyone wanted to do a change the prepayment meter would have to be changed anyway. no one seems to be interested in fighting there case for cheaper power pricing WHY ? .

Member
Peter Broderick says:
9 November 2015

How do people know the difference between tariffs when changing suppliers

Profile photo of duncan lucas
Member

You contact your new supplier as I have done and they will take your details of your average gas/electric consumption ,the size of your house ,what is the type of energy used to cook/heat your home and what sort of bills you are at present paying to work out your average bill with them which will be a yearly amount also converted into KWh and hopefully ,like me find your present company is ripping you off via your electric bill . I will now be with an ECO company using turbines and the profits given to shareholders who in this special case are the customers. All praise to Which as I checked their power company customer satisfaction graph.

Profile photo of John Ward
Member

Peter – Using Switch with Which? is a good way to check out the different tariffs and T&C’s available. You will need to have your consumption figures to hand. You don’t have to go through with a switch if you don’t wish to – you can just look at all or a selection of the companies and see how their prices compare. If you do wish to switch, it is quick and easy but you should read all the guidance before doing so.

Profile photo of malcolm r
Member

Peter, as John says, try Which? Switch- it seems to cover all the suppliers, lists them in descending order of savings – best first. I use it regularly to check whether I am on the best tariff and have switched through it – easy.

When you have found a potential new supplier (or a better deal from your existing one) you can click on details to find out more about the tariff and compare it with the one you are already on.
If you are on a fixed deal it gives a false reading for the savings you’ll make; it assumes you will revert to your supplier’s standard tariff after your deal expires – a more expensive one – and calculates your yearly spend as a combination of the two. Not helpful.

You don’t have to take both gas and electricity from the same supplier – you can check who is cheapest for each if you wish.

Member
G. Sasse says:
19 November 2015

Please keep me informed as to progress.

Profile photo of Tresa
Member

Every comment seems to talk around the subject about nationalise privatise switching etc-The point is the prices are too high regardless of how many times people switch and also who wants to spend a lifetime going through revolving doors to the same people with different logos asking near enough the same price.
The point is that number one like air and water it is a life and death product. it is not something to sell like a bag of crisps it should not be run for profit and im sure their would be many none profit organisations who would be glad to run any one of these companies and that the government should nationalise it and run it on a none profit basis. As for private being cheaper than nationalised-hell would have to freeze over first for that to happen-

Profile photo of DerekP
Member

If you want a not-for-profit retailer, you might check out ebico…

Profile photo of duncan lucas
Member

Tresa couldnt agree more ! .You comment -hell would have to freeze over first is correct but I shall add = hell will freeze over first before Westminster Nationalizes or RE-nationalises ANYTHING this is a BB government . Option change your vote next time.