/ Home & Energy

Petrol pump energy pricing is key to switching

Energy meter

Our latest research, conducted with EDF Energy, reveals that simple pricing would mean more of us would be able to easily spot the cheapest energy deal. In turn, this would increase our willingness to switch.

This probably isn’t a surprise to those of you who have supported our energy campaigns over the years. The idea of having simple energy prices, like a petrol pump display, which includes both the standing charge and unit rate, is one that could make a big difference to customers. You wouldn’t need to know how much energy you use to be able to identify the cheapest deal.

Our research found that the number of people spotting the cheapest energy tariff using simple pricing more than doubled compared to the current pricing format.

Around nine in 10 could spot the best deal with simple pricing in both a price comparison website and a newspaper ‘flat table’ scenario. This compares to around just four in 10 in both scenarios for the current pricing format.

Simple energy pricing is easier

The research carried out with EDF Energy, who have long supported this approach to simple pricing, also found that:

  • People thought simple pricing was easier: 61% said it was easy to make a choice with simple pricing versus 38% who thought it was easy with the current model.
  • People found simple pricing quicker: the average time people took to choose a tariff under the simple pricing structure was 36 seconds compared with 55 seconds for those under the current pricing format.
  • People were more likely to switch using simple pricing: 47% said they would switch their energy tariff when looking at the simple pricing table compared to 38% who were given the table with the prices laid out in their current format.

Simple pricing is a winner! In a truly competitive energy market you should be able to spot the cheapest deal at a glance, making it easier to switch. The Competition and Market Authority’s investigation into the energy market investigation is a good opportunity to introduce simple pricing.

Do you get confused when comparing different suppliers’ energy prices? Would you prefer prices to be displayed in a simple petrol pump format?

Comments
Member

Yes, I would prefer prices to be displayed in a simple petrol pump format to be able to compare different suppliers’ energy prices. There are many other areas where the same system should apply as well, eg mobile phone tariffs, savings accounts’ interest rates after everything has been calculated, and so on, you name it.

Only ill will fueled by greed on the part of (some/all?) suppliers prevents this from being the case. Bamboozle the customer with specialised, complicated and convoluted English, specialised, complicated and convoluted figures, induce apathy, and you will be able to make the greatest amount of money, which seems to be the sole interest of most/all suppliers. If you are interested in providing a good, transparent service as well as make money, you will make less money. (This is the type of subject that tends to make me think cynically and in black and white, sorry.)

Member

I am very glad to hear that Which? is still campaigning for simple pricing.

Having unit pricing makes it as easy for everyone to compare prices. It is very sad that we are expected to resort to websites to work out where to buy energy from.

The fact that many don’t regularly switch tariffs is clear evidence that the present system is unsatisfactory.

Member

Kate, I disagree slightly with one of your comments “You wouldn’t need to know how much energy you use to be able to identify the cheapest deal”.

There is a trade-off between the standing charge and the price per unit. Generally if a supplier offers a low standing charge, there will be a higher price per unit, and vice-versa. For consumers who use very little energy, a low standing charge is preferable but for consumers who use a lot of energy, they might be willing to pay a higher standing charge in return for a lower price per unit. In order to identify which is better, a consumer would need to know their approximate usage.

Nevertheless I fully support what you are advocating. It would be a great improvement.

Member

If we have simple energy prices there are no standing charges, so that everyone pays the same price for the amount they use, just as we do with fuel.

Member

I’m sure that’s what Kate meant when she said in the Intro “like a petrol pump display, which includes both the standing charge and unit rate”. In other words any administrative costs like metering and billing are absorbed within the display price. I might be persuaded to support smart meters if they incorporated a display panel that said “Today’s unit price is £0.xx”. I would go further as a service to consumers and show them in ascending order after the evening news on televison [they can do it do for the lottery numbers]. Three-click-switching should be possible on-line.

Member

It looks as if smart meters will be forced on us, despite the vast cost of the rollout. The energy companies will benefit most, so perhaps they can be used in a way that would help the public, who will foot the bill.

Member

The problem is that suppliers will not drop their standing charges altogether. Some suppliers target very high users by offering a high standing charge (reflecting the wholesale standing charge that they pay) and a low price per unit. If we abolish standing charges altogether, then we abolish an element of competition between suppliers. We can abolish standing charges at a retail level only if they are similarly abolished at a wholesale level.

Member

Presumably simple pricing disregards any allowance for volume – you just multiply the unit price by the consumption, the unit price stays the same across the board? I like that. A system that doesn’t penalise low users nor reward wasteful users has to be worth going for. Coupled with better regulation of the things that make up the ‘standing charge’ element and transfer of levies to general taxation, we might end up with an equitable structure. Then all we’d have left to sort out would be the dual-fuel discounts, paperless billing discounts, on-line meter readings discounts, and the exit penalties, and switching would be a piece of cake.