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Who switched energy suppliers in The Big Switch and why?

a big switch on red background

In 2012 Which? and 38 Degrees launched the UK’s first and largest collective energy switch. With 145,000 people taking part, this provided a unique opportunity to analyse real life switching decisions.

At the Centre for Competition Policy – part of the University of East Anglia – we were able to analyse the wealth of data collected from The Big Switch, as well as carrying out a series of follow-up questionnaires with participants. Our aim was to get a better understanding of the factors influencing consumers’ decisions to switch energy supplier.

If you responded to one of these surveys, we want to thank you for taking part – without you the research wouldn’t have been possible.

Reasons for switching energy suppliers

We know that the potential savings are an important factor for switching, and there was a substantial average saving of £120 available to participants of The Big Switch. In total, a quarter of the people who could have saved decided to switch, collectively saving an impressive £5.5m. But this does also suggest that people’s energy switching decisions can be influenced by other factors, even where there’s money to be saved.

After getting energy suppliers to compete, the Big Switch offered the best deal on the market for the majority of the UK. However, in some cases the deal wasn’t the cheapest for particular participants. To make sure everyone saw the cheapest deal for them, Which? showed the cheapest deal in their area alongside The Big Switch offer. But displaying two offers seems to have deterred people from switching rather than spurring them on. This is a particularly interesting result; does comparing more offers make you feel informed or are too many options overwhelming?

We also found that the length of time it took actual switchers to complete the switching process was generally less than the length of time non-switchers expected the process would take. This suggests a perceived hassle factor, which puts people off switching their energy supplier.

Why do you switch?

Other reasons for people switching included: using accurate energy consumption information from their bills to generate a quote, rather than just estimating it; taking part with the aim of saving money rather than just out of curiosity; and preferring the ethical or environmental stance of the new supplier.

Choosing not to switch was associated with relying on an estimate of your energy bill; facing an exit fee when leaving an energy company; and being busy during the period of The Big Switch.

Do any of the above factors fit with your experiences of switching energy suppliers? Do you find the amount of choice overwhelming or are you confident navigating the options? Is saving money the main driver for you to consider switching?

Once again we would like to thank those of you who took part in this exercise and provided survey responses. If you’d like to see the full analysis, you can download the technical report here.

This is a guest post by David Deller at the Centre for Competition Policy – part of the University of East Anglia. All opinions are David’s own, not necessarily those of Which?

Comments

There’s a new Which? petition asking me to fix the Big 6. They say Ecotricity, Ebico and Ovo lead the way. Well, they might in customer service but come nowhere near my current supplier in cost. I can tolerate occasional CS problems but cost is what matters to me. Prompted by this petition I checked Which?Switch and found my current supplier still tops, but with a new tariff that will reduce my bill by around 5% due mainly to a reduced gas price. I’ve just changed to it online.

Incidentally Ofgem are consulting on their work programme for 2015-6. If you want to comment you can find the programme and link here:
https://www.ofgem.gov.uk/publications-and-updates/ofgem-our-strategy?utm_medium=email&utm_source&utm_campaign=5268181_Daily-Alert_22-01-2015&utm_content=$LINK_KEYWORD$&dm_i=1QCB,34WYD,F31FFV,B8NMI,1

Latest News.

NPower is cutting its standard gas prices by an average of 5.1% from February 16th.

Tariffs are changing quite often at present, particularly with volatility in the gas market. Might it be useful if, when asking Which?Switch for price comparisons, you could opt-in for a monthly update to give your cheapest current deals by email. Particularly useful when the promised quick-switching comes into force and changing tariffs more often will be worthwhile financially?

As only standard prices are scheduled to be cut presumably people on fixed tariffs will miss out as they will be penalised for switching to another supplier. This is something the CMA ought to address as this practice surely stifles competition. Regular updates on the volatility of the energy markets would be welcome as better communication and transparency would assist in the switching process, enabling consumers to have more autonomy over their energy affairs and encourage more people to switch, as long as this doesn’t add to consumers bills, but as long as there is reliance on comparison sites I fail to see how this could happen unless funded from general taxation.

Beryl, these days many fixed tariffs have no exit penalties if you switch suppliers, and certainly not when you change tariffs with the same supplier, so no problems there.

Reduced gas prices do not only show on standard tariffs, but also on fixed tariffs – a new version just appears that you switch to, as I have in a matter of minutes getting a 5% reduction.

Having put your details into a comparison site it should be simple for an email to be automatically sent advising of better deals. I already get that from one of my energy suppliers when the saving exceeds £1 a week.

Comparison sites are watched for good practice by Ofgem – they have a Confidence Code, currently being updated

https://www.ofgem.gov.uk/publications-and-updates/confidence-code-review-january-2015-policy-decision?utm_medium=email&utm_source&utm_campaign=5299461_Daily-Alert_30-01-2015&utm_content=$LINK_KEYWORD$&dm_i=1QCB,35L39,F31FFV,BAZOI,1

No need for more Govt. involvment.

Our supplier, E.On, offers penalty-free switches to lower-priced tariffs within their own tariff menu as they become available [which, as Malcolm, says has become fairly frequent lately], so it isn’t always necessary to switch to a diffferent company to get a better rate. If an alternative company’s prices are so much better, then E.On’s exit penalty of £5 per fuel is hardly a deal-breaker anyway. One consequence of switching internally is that a new contract period starts immediately putting off the day when you can make a penalty-free exit.

I agree with Beryl that at the moment there is a case for encouraging people to switch because that is the best way to make competition effective. But since energy is an essential commodity we should be at ease over it and not have to keep worrying about fractional movements in prices and changing suppliers all the time – switching is costing the industry millions of pounds a year and we’re all paying for it. Ofgem has made a useful start on consumer-biased regulation by rationalising and harmonising the tariff structures to make comparisons easier. In fact comparison websites are becoming less relevant as the myriad of tariff types has been drastically boiled down.

I saw an interesting breakdown of “the costs that make up energy bills” on a friend’s recent statement from SSE as follows: Buying the energy 52%, delivering it 24%, govt. environmental & social schemes 8%, billing, customer services & IT 6%, VAT 5%, and supply business profit 5%. So the reduction in global market prices for oil and LPG bears on only half the bill. And as has been seen recently, EDF customers won’t see much benefit because that company made a price promise to customers that anticipated increases rather than reductions in input costs. EDF entered into forward procurement contracts that looked very good at the time but have now been overtaken by falling world prices which cannot be passed through to customers [who are said to switching in droves].

Sometime around the end of May-early June the government, whoever they are, will have to give consideration to how to compensate for the fall in VAT revenues from lower energy bills and lower prices on other goods and services. Savings on the government’s own energy consumption and other purchasing won’t offset much of it so some cunning book-balancing required. I would expect it to be wrapped up with increased reliefs to the offshore oil and gas industry and putatively funded from economic growth resulting from lower input costs for industry and commerce [to the extent that that isn’t all absorbed in countering the impact of devaluation in the Eurozone].

John, Ofgem publish, monthly, an SMI (Supply Market Indicator) that shows, in an average domestic energy bill, how an average major supplier’s charges are made up. 44% gas and electricity, 23% network (transmission),7% environmental and social, 13% supplier operating,

It is estimated that “environmental and social obligations” cost us £93 – perhaps these should be funded elsewhere?

More importantly it shows that the pre-tax margin the supplier makes has increased from 3.9% in 2013 to an estimated 6% last year and a predicted 9.6% this year – that is a 2 1/2 times increase in % margin. As it is an average clearly some will make more than this. That, to me, seems an overgenerous increase in return at our expense. Should not Ofgem be stepping in here to protect consumers?

If environmental and social costs were transferred elsewhere, then the same should apply to standing charges. It’s not difficult to see that standing charges bear little relation to the actual cost of supplying gas and electricity to an individual home.

At present, those who cannot afford to heat their homes adequately are subsidising those who are heavy users of energy, for whatever reason.

Environmental and social costs are a form of tax. Standing charges should represent the fixed costs directly associated with supplying you and opersating your energy account. It costs your energy supplier to provide their operating infrastructure, reading your meter, preparing your bill, etc – these are costs that are not related to your consumption. It costs just the same to operate a high user account as a low user.

I want to see these fixed costs monitored and approved by Ofgem, kept to a minimum, and kept separate in your bill. I do not want to see vulnerable users, or any users for that matter, whether high or low, paying more in “fixed costs” than they should.

I regret the abolition of the two-tier tariff. The first units were at a higher cost than the later ones. This at least gave a choice in how we paid the standing charge, and did of course mean some low users were not paying the full cost of operating their account. But it also meant high users only paid up to a limit – not continuing to pay more than a fair share.

Not only are the standing charges hurting the most disadvantaged people but it’s not difficult to see that they do not relate to the costs of maintaining supplies to properties. Compare, for example, the standing charges for supplying property in isolated rural areas with those for recent properties in built-up areas. I have done this, albeit a few years ago.

I have to agree that there is a huge inequity in the way these services are charged. There are differentials in that certain companies ‘own and maintain’ the supply infrastructure in different areas. For example, my area is maintained by SSE, so my supplier, CooperativeEnergy, has different pricing for my area than say someone in Wales where the infrastructure is maintained by SWALEC.

However, I don’t see any transparency in the pricing. I’d like to see a true breakdown of the transmission charges, but I won’t hold my breath as I don’t believe that anyone actually knows the true costs. The transcos are able to determine their overall annual costs which they then divide up using some method (probably sticking a wet finger in the air) to divide it amongst home and business customers depending on the capacity of the supply line.

Do they add a percentage for the estimated following year’s investment? I bet we pay for much more than just the maintenance.

terfar, the transmission companies charges are regulated by Ofgem. Whether that gives a fair outcome I don’t know.
https://www.ofgem.gov.uk/electricity/transmission-networks/network-price-controls

One point you touch on is exactly the way I see it – standing charges need to reflect the cost and Ofgem should be dealing with this to make them realistic.

There is no direct correlation between low energy users, medium and high and “vulnerability”. Many “vulnerable” users will be high users because of age, health, all-day occupation, poorly insulated houses, larger families. Many low energy users will be well off, no family, both working, modern well-insulated house, out during the day. Should the former subsidise the latter?

I want to see the vulnerable helped by the government, but I do not want to see cross-subsidy used indiscriminately. If all costs are rolled up into single tariffs, a high energy user will be contributing nearly 2.5 times towards costs that are not directly related to energy consumption, and a medium user nearly 1.6 times, what a low user would contribute. That makes no sense to me.

When prices go up, so the ‘percentage profit’ increases in proportion to the price rise. When the prices fall, they ensure that the ‘enhanced’ profit doesn’t fall by increasing their margin and not passing on the full fall. That’s why we lose whether it is an increase or decrease in wholesale prices.

I would like to see high users contributing more towards energy costs and so would many who care about the environment. Anyone who is struggling with their bills should be eligible for means-tested benefit. If they are living in a large, poorly insulated house there are various possible solutions.

Many people who have planned carefully for their retirement have been let down by failure of pension schemes, rising prices for food, rent and transport. State pensions are not generous and the goal posts have been moved regarding retirement age, especially for women. Some have been unable to plan because of their own health or family problems.

What I am pushing for is simple unit pricing, as supported by the Which? campaign. What I would prefer is for standing charges to be funded from taxation, which might help towards resolving the big imbalance between the poor and the wealthy in the UK.

High energy users – including the many vulnerable – do pay more in higher bills, more VAT, more in social and envrironmental costs………….

Taxation should not be used to pay private companies’ costs. The users – domestic, commercial and industrial, should pay these costs directly

A single-unit-charge only proposal was made on the basis the British are quite incapable otherwise of estimating a fuel bill. (Multiply two numbers together and add a third is too onerous for us is it? If so the UK is doomed – it won’t survive in this competitive world). If you roll all the variable and fixed costs into a single unit charge, what happens in a colder winter? We use significantly more energy, more units consumed mean we contribute significantly more than usual to the energy companies’ (fixed) costs so they reap a big windfall profit and we, including the vulnerable, suffer financially out of all proportion . Where is the sense in that?

What we, Which? and Ofgem should be concentrating on is developing a core charging regime that is based on real costs and is fair to most users. No extortionately high standing charge – but ones assessed as fairly representing fixed costs, plus unit charges that represent just energy consumption. I’d like to see the other costs – social, environmental, smart meter etc costs taken out of our bills and funded from taxatiuon – the government introduced these “taxes” and should be seen to deal with them.

At the same time I believe consumer should have a choice. so if an energy company wants to introduce another type of tariff that might be appropriate to particular users – say very low energy consumers – that should be their commercial decision, and our decision whether to opt for it.

I would like to see more opportunity for the public to have an input. I appreciate that anyone can write to Ofgem but that is only likely to get input from those with a special interest in the topic. Energy costs are – I believe – currently the greatest financial concern of the UK public.

We know that many people do not switch energy supplier and are probably paying more than they need to. The energy companies don’t have a lot of trust. Many feel that energy supply should never have been privatised. We are having to pay for smart meters and rather than have a balanced approach to renewable energy supply we have had to pay for more wind turbines than makes sense. We have also allowed our energy supply to become controlled by companies outside the UK. Ever since the power cuts of the 70s I have been well prepared for power cuts. These are becoming rather too frequent where I live.

We are probably stuck with the current energy companies, but I would like to see the government controlling the price of gas and electricity. That would help control the greed of companies, which are obviously run to maximise their profit. Now that smart meters are inevitable, we may as well use them to the benefit of the consumer and not just save costs for the supply companies.

When I used a couple of online price comparison sites last year, they did not include the collective switching offer run via the local council.

We can all understand the price of petrol and other examples of unit pricing. For goodness sake, let’s have energy pricing that everyone can understand.

“For goodness sake, let’s have energy pricing that everyone can understand”. It is not difficult unless you persuade people it is. it could be made simpler still by removing non-energy charges. But we will not make it simpler by introducing a single unit price that will distort the market to make it artificially “simple” and benfit a good proportion of well-off consumers.

Energy is probably not the most important financial issue in many peoples lives. Food, housing and, for many, travel, take a far higher proportion of their income than energy. so lets take a balanced approach to how and what we spend overall and not just focus on a populist, flawed, theme that will not save most people very much money.

I doubt that anyone is interested in our dispute about what is fair, but have a look at the current Which? campaign, which I support:

“CAMPAIGN ASKS

Our Fair Energy Prices campaign is calling for the Competition and Markets Authority (CMA), as part of its current investigation into the energy market, 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.

– Require energy suppliers to use simple, directly comparable pricing, similar to petrol pump displays, so people can more easily compare prices and make the best choice if they switch.”

I am interested in putting information into this conversation, not in a dispute. I’m quite happy to put forward a view and have it challenged – that way we can all sift out the meat of the problem and draw our own conclusions based on substance.

I disagree with Which?’s “petrol pump price display”. It does not yield a fair method of paying for what energy costs. It distorts the market, subsidises indiscriminately, and could grossly inflate energy companie’s income when consumption is above normal. My view expressed earlier – let others view the arguments and draw their own conclusions.

We should pay for energy just what it costs and help vulnerable people from the public purse.

This is a conversation, not a personal dispute. 🙂 . Ofgem invite comments on its strategy; I’ve provided a link and done just that. Others with firm views can do the same. We need to be prepared to contribute if we want our views heard.

Simple unit pricing need not grossly inflate the companies’ profits if the government controlled the price of energy. Many are not happy with how they operate anyway, for example delaying price decreases when the wholesale price falls.

It cannot be refuted that standing charges mean that low users pay more their energy.

The fact that many people are paying more than they need for energy is evidence that the switching system is not working as well as hoped. I have not seen details of how much this costs to operate, but there is no doubt that a significant part of the costs is borne by those who don’t use it.

I have it in my diary to respond to Ofgem. I wonder if those who struggle with energy bills know the difference between Ofgem and Ofcom, never mind about the current opportunity to comment.

Government interference is often inept and usually for short term political gain. Many would not want that. Ofgen have the remit to protect consumers – somehow we must make them do their job properly.

I appreciate that government can be inept, but government is responsible for managing Ofgem.

Malcolm: We wouldn’t be having this discussion/debate if there were no government interference. I understand that Ofgem, although allege independence, are officially appointed by HM government to attempt to straighten out and resolve some of the machinations and skulduggery endemic in the energy market, and they seem to be doing a fine job according to the reports you have very kindly directed toward us, but a more simplified version would prove more appealing I am sure to most consumers and especially the very elderly and infirm who would perhaps struggle through a 45 page document and remember its content to boot.

I don’t accept that Third Party Intermediaries can be monitored effectively by regulation and that commission paid by suppliers will not affect consumer bills as ultimately all companies have to make a profit in order to stay in business and it is always the consumer who ends up paying by one means or another.

My current fixed agreement with Scottish Power is about to expire and I have been offered very tempting cut price deals to remain with them, including no exit fees on fixed tariffs. If and when the energy market becomes more open and transparent as Ofgem claims, there will be no need for fixed tariffs as they were originally introduced during the ‘tacit collusion’ phase evident in the period of increasingly high prices which consumers latched on to out of desperation to prevent further increases. Now we are seeing prices falling in a more volatile market, will suppliers fixed tariffs over estimate consumers consumption to reconcile the deficit? I am very curious to know who your current suppliers are Malcolm, can you let us know please?

The main criteria has for the time being been overshadowed by Ofgems role in all of this. Let us hope that the CMA can win over questions relating to vertical integration affecting price controls and restore competition to the energy market system.

Beryl, I’m also currently with SP and EDF. Currently fixed price tariffs in the main seem to have no exit penalties, whether you stay with your supplier or move. Their advantage will be if prices look to rise and you can stick with your tariff until it ends.

I put my meter readings in monthly and can pay off a bill if it exceeds my monthly payments, so I don’t see how a supplier should overestimate consumption.

SP’s current Fix Feb 16 tariff beats all for my area and I have just changed to it to save around 5% on gas and 1% on electricity. Their customer response times have been appalling and I have recently had compensation from them but they seem to be improving now. When you do get in contact they have helpful people to talk to.

EDF email me whenever a new tariff appears that is at least £1 a week cheaper – from them or a competitior.

Ofgem have a lot on their plate – not just looking after consumers. Perhaps we should have regulators who are purely consumer focused.

My personal view is that somewhere between the current standing charge (its level) plus unit cost and a unit-only tarrif lies the best compromise that would be fair to most people. We can all email a view directly to Ofgem. However I wish Which? would look at all the arguments in much more detail and use any muscle they have to work on our behalf to get sensible tariffs sorted.

My simplification of tariffs would include getting rid of the “add-ons” that have appeared and confuse everyone – like environmental, social charges, smart meter roll out etc. Stick with raw fuel cost, transmission cost, energy company cost and vat (although I regard this as a tax that should be removed on this essential purchase).

Yes – we must chip away at these add-ons and get them progressively transferred so that we can start to compare the raw costs of staying warm. It could be that by that stage the supply and metering costs, and the controversy over the fairness of standing charges versus pure consumption charging, would be less of an issue. I suppose I could look it up somewhere but like mosts consumers I don’t have a clue whether the vat on our energy bills is charged on all of it, some of it, or just bits & pieces . . . I mean – are we paying tax on government levies? The more we can strip out the peripherals in the bills the more clearly we can compare not only the prices but also the performance efficiency of the different suppliers.

John, when you look at a bill you see a unit cost, standing charge then vat – so you are paying tax on these add-ons – levies.

What you don’t see is where levies are charged – social, environmental, smart meters. Do they appear in the unit cost – in which case the more you use the more you pay – or in the standing charge. That is why I want to see the bill broken down into its components. The standing charge should cover the true and fair fixed costs and be a minimum; I think social, environmental, smart meters etc should either be taken out total or included here. The unit charge should be purely set on rae energy and transmission cost.

I suspect I am far from alone in not bothering to look up the bill when I get an e-mail from E.On to tell me “it is ready” – just like a piece of toast. From the companies’ point of view this is why they induce us to pay by direct debit, give up paper billing and take two fuels together – it increases our lethargy potential.

I sometimes wonder how company directors sleep at night when they are composing their Social Responsibility Statements for inclusion in their annual reports: “We make maximum profits when the weather turns really cold because although we have to buy more fuel to supply our customers our other overheads are virtually unaffected thus our operating margin increases exponentially. We have the technology to reduce our unit charges during these periods but people prefer the simplicity of standard charges. People who live in properties with low heat retention values and which are incapable of economic improvement make a positive contribution to our profit performance so we actively target such customers in order to add embedded value to our baseline profitability profile.”

I seem to recall that the government once forced energy companies to hand back “excess” or “windfall” profits to customers. So it’s time [election time, actually] for another desperate iniative that won’t solve the underlying problem but will make the politicians feel good. I think it would be really good if we could manage to get the cost of heating right up to the top of the political agenda and get a bidding war going between the parties over who will do most to sort it out. Shame they wasted the road fuel duty increase opportunity at a time when pump prices were falling dramatically – that could have been used to cut the energy levies.

Thanks John. You have prompted me to look at my Scottish Power account and discovered that my direct debit is being put up by nearly 63% this month, despite a current credit balance of £105.17. 🙁

I don’t recall an email but found out from a message waiting for me when I logged in to their website.

I was expecting some increase because I have been resting a twisted ankle since Christmas and spending most of my time at home, but this is a surprise.

My thoughts that SP might be better at account management than e.on might have been premature.

I will comment Vodafone for sending out an email announcing what I will be billed in large numbers. Although it has been unchanged every month, I do log in and have a quick look.

We have already established suppliers forward buying practices so I am pretty certain they have a very good idea of their financial situation and have adjusted their deals accordingly for the next 12 months to ensure they remain in profit, the details of which cannot be known by consumers due to commercial confidentiality.

Beryl, I agree. As I posted earlier, Ofgem are predicting an average energy company profit for this year nearly 2.5 times what it was 2 years ago, at 9.6%. This should be dealt with either by capping or,maybe, excess profit should simply be fed back to consumers as a rebate.

Ofgem should give us this information to ensure “transparency”.

What also bothers me is the proliferation of smaller energy companies none of whom come close to offering me a competitive deal. What are they about? Just profiteering? We should not just focus on the “Big 6”.

Malcolm: I agree there should be more transparency but would Ofgem need government intervention to cap profits etc? I am not sure of all the legal implications required to inaugurate this and how much authority Ofgem have been given over profits and prices.

Having experienced terrible service with NPower in the past, service is very important to me as well as price.

Beryl, I don’t honestly believe goverment can or should cap profits. The tool would be misused. We have to get to a point where a choice of provider – real competition – does that job. This is why I would have thought a smaller entrant into the market should be in a position to provide that choice where they are content to operate at around 5%. Alternatively a profit-sharing supplier – like the Co-Op used to be – where customers are also members and get a dividend. Or maybe companies set up with customers as shareholders getting a “genuine” dividend.

Ofgem produce a monthly “SMI” – supply market indicator – which shows the costs that make up an average big supplier’s bill to the consumer. I would like to see this in a different form – how a “model” suppliers bill should be constructed, with “benchmark” kWh costs, company fixed costs, acceptable profit, plus the governments add-ons, against which we can judge real energy suppliers. We need to know whether the prices we are paying are fair. I think this is where Ofgem could be most effective.

What I still find strange is the lack of interest in comparing how these matters are addressed in other countries so we can find best practices.

I am very concious that a couple of years ago many were going mad about energy prices and then a few brave souls pointed out that the UK was actually cheaper than most countries in the EU.

I research by nature but the European power market and local markets – in their native languages are a bit beyond me.

In 2007 the French deregulated their energy market and it is interesting to note that most of the French consumer organisations even now recommend staying with the incumbent EDF for electricity.

dieseltayloer, as you seem to intimate we do need facts and information to properly assess how the energy market should best work for consumers. I find it worrying that Which? have pursued a “petrol pump price” agenda without attaching a balanced argument to it. We, the consumer, need impartial imformation. It is what a consumer’s association should provide. I wonder. like perhaps you do, what the European consumers associations are doing about this topic, and how they are presenting it?,

Like Malcolm I do not support artificial caps on profits. The way to deal with this is through corporate taxation of profit. As well as companies being taxed at corporate level, the shareholders’ dividends are also taxed [at 10%]. Whether a significant amount of corporate revenue escapes to foreign countries before being taxed here I don’t know but, cynically, I expect so.

Malcolm

(Playing devil’s advocate) Do you think that 9.6% profit is too high for a company? Many companies make 2 or 3 times that profit, even after paying staff and bonuses, etc.

Personally, I think it is too much. The companies – especially the smaller companies – don’t really get their hands dirty. They buy the energy from the generating companies and they use the services of the transmission companies to deliver the energy to our homes and businesses.

So what do they actually do? They sell us the end product, read our meters invoice us and take the money from our bank accounts. So they don’t actually get their hands dirty.

It’s a bit like the garage owners who have complained for years about their low-profit margins. They are the same in that they don’t do anything. The fuel is delivered direct into their tanks, the purchasers have to fill their own vehicle and often have to pay by card at the pump, so there not always need for them to have anyone manning the site. Other than cleaning the site, there’s not much to do.

terfar, I am in favour of free enterprise and an open market. I believe this is what drives an economy and produces a nation’s wealth. The incentive to make profit should make business more efficient, drives innovation and development and keeps them on their toes against competition – both home and abroad – particularly when investors look at who to support.

Having said that, there are industries that are so important to our basic life requirements, and that of course includes energy, that controls may be required. Normally competition among all the suppliers should do this. But when we have 34 energy suppliers – to which we all have free access – it seems strange that such large margins are possible. You wonder if they are all trading on the same premise – many customers’ inertia to changing, maybe a cabal-type market, capitalising on the opacity of wholesale prices, making hay while the sun shines.

They do need watching to ensure they do not abuse their position. My big criticism is that Ofgem appear to be reluctant to really get stuck into this, and they are supposed to be the custodian of consumer interests. Why is it Which? that produces a wholesale price argument backed by data when Ofgem should be doing it, and bringing the suppliers to heel?

I believe a 5% profit is quite reasonable, given the volume of captive business an energy company will do. Not 9% or greater (9% is only the estimated average).

As I said earlier, i would like to see a co-operative style energy company where the customers share in the profits.

It is interesting that a price comparison site can make the equivalent of 5% on your bill when you switch through them without all the hassle the energy companies have to go through to make the same. Funny old world.

When the electricity and gas industries were denationalised profit forecasts of the supply companies were around the 3-4% mark on the basis that they were low risk businesses operating in mature markets, that as utilities they were more aligned with commodities which historically had modest yields but enjoyed enduring demand, and – as Terfar rightly points out – they don’t add much value to the basic product [indeed most of their time is spent admiring it and seeing how they can bundle it with something else to make even more money from our dependence on it]. There is a case for saying that those that generate electricity need good profits to provide funds for investment, but the generating business is increasingly ring-fenced from the supply side now and there are such massive government subsidies and incentives for power genration capacity that high profit ratios are not so important. As I have said previously, if energy suppliers are making bigger profits because of the colder weather [because their fixed overheads diminish as a proportion of their costs and their margins expand] there needs to be a mechanism for clawing some of it back.

One point I find really annoying about the energy suppliers (at least those that I have used) is that their statements dates are inconsistent making it difficult to compare your own consumption accurately using the quarterly statements.

I report my monthly readings regularly either on the 1st or 31st of every month. But the statement dates are never exactly 91/92 days. So comparing this quarter’s consumption with the figures from last year are inaccurate. Worse is that they don’t use quarters from month end to month end, so they ‘adjust’ the reported readings which are always hopelessly inaccurate estimates. How they manage to make such a wild guess for the additional days (say from 1st of the month to the 8th of the month) when their quarter finishes is beyond me. Even a 4-year old with an abacus could make a better attempt.

I’d like to see them bring accounting quarters in line with reality: Jan – Mar, Apr – Jun, Jly- Sep and Oct – Dec. Would it be that difficult?

A little snippet from yesterday’s BBC News website :

“The big five energy comparison sites have admitted they earn up to £30 in commission every time a customer switches provider. When customers change both electricity and gas accounts, they charge up to £60. The figures emerged as the bosses of five price comparison sites were questioned by MPs on the Energy Select Committee. The price comparison sites argued that the fees were justified.Such payments are controversial, as sites have been accused of “hiding” deals which do not make them money”.

It’s time we had an energy market that deprives these parasites of their lifeblood which is coming out of our bills.

Thanks for the interesting snippet, John. For years I have wondered about the cost of switching insurance. With insurers pushing up annual premiums even if we have had no claims for years or even decades, there is a lot of switching going on. When I switch insurance I read the T&Cs and always end up making calls to check one or more points where there are uncertainties.

More recently I have been concerned about the hidden costs of switching energy supplier and your figures are helpful. On one hand I am not wishing to discourage anyone from switching to another energy supplier to save money, but the cost of switching will be met mainly by the majority who have not switched supplier(s).

It is time for more transparency. Perhaps obliging price comparison sites to publish their fees on the homepage of their websites might help everyone to understand how they are contributing to our energy costs even if we don’t use them.

“The Which? group is a not-for-profit social enterprise. We receive a flat commission of between £15 and £45 when you switch energy suppliers using Which? Switch.”

Someone has to pay for operating these sites, but this seems a large fee. There should be a warning on the site, because if you simply use it to find the best supplier, then go to them direct to switch presumably no fee is paid? Keeps costs down.

What would be an alternative would be for Ofgem (I might regret this) to set up a comparison-only site that included every energy supplier from where you could get a lowest price. Then just contact the company to make the change. No cost (although the taxpayer would fund it).

As has been said, these hidden charges will be paid for by consumers. Switch a couple of times a year and that could cost up to10% of an average bill – £120! Not much less than Which? is criticising the energy companies for their “overcharging” – £145 a year (see their current campaign).

So we have immediate major cost savings perhaps – stop charging such large amounts to switch (up to £120), redress the past overcharging (£145) and put everyone on fixed tariffs instead of standard (£253). That’s £518 in total – 40% off your bill at a stroke!

Of course these are politicians numbers – they don’t add up this way. The point is there are far bigger savings to be made by cleaning up and simplifying the system than by “freezing energy prices”. We should expect the regulator to be actively doing this sort of work; they should not need prompting by us or Which? Makes you wonder why they don’t.

Which? is to be commended for at least publishing these charges on their homepage, something I advocated in my previous post. It would be good to know why the switching cost can vary between £15 and £45. The most obvious factor seems to be whether or not it affects both electricity and gas. Furthermore, any profits made by Which? from switching service are likely to be used for a worthwhile purpose.

Hopefully switching costs will become another focus of attention.

wavechange, you need to look at the bottom of the page and enter “about Which? switch” to find the charges. I doubt many people will do this – just straight in with their post code at the top and find the comparisons.

This is no criticism of Which? although I would prefer it if all these “hidden” costs were made explicit at the beginning of the document, and pointing out that no commission charge is incurred if you go direct to the supplier to switch. But then these other sites would not be making such easy money at our (unknown) expense, would they. But then again, would we find our best deals without them? That’s why I would like to see an independent site that does not charge operated by, say, Ofgem. Energy supply has a social element to it as well as a commercial one so quite reasonable for the taxpayer to fund it – in my view.

As I said, it’s on the homepage, or at least there is a link from there.

Don’t bother looking at the homepage of uSwitch. Clicking on ‘About’ or ‘Help & FAQ’ from the homepage produces no information.

I agree with you regarding commission charges.

Earlier in this Conversation I mentioned that Ofgem lists ELEVEN price comparison sites. It’s symptomatic of the complexity associated with energy supply these days. I agree that Ofgem should provide us with the sole price comparison site and until we have a regulator to oversee our regulators, Which? should continue to monitor the performance of Ofgem.

Malcolm asks “would we find our best deals without them?”, referring to comparison websites. Can we sure we will get the best deals by using them? Not necessarily, according to the revelations at the Energy Select Committee who quizzed the bosses of five comparison sites. These sites have a tendency to conceal the best deals available in the market place if the comparison site will not attract a commission on a switch to that supplier. The new Ofgem ‘Confidence Code’ is intended to outlaw that practice [it reminds me of the Colgate Ring of Confidence and it might be just as beneficial].

The link to that BBC article which is quite interesting but has attracted little response is as follows :

http://www.bbc.co.uk/news/business-31110625

John, I’ve always used Which?Switch to check deals and trust that they include all of them. You cannot switch to every deal through the site. However, knowing the commission made I’d be inclined to go direct to the supplier. Sorry Which? I fund you through my subscriptions.

I even more want an independent comparison site that does not earn commission. Whyt not Ofgem?

Good question Malcolm. I am all for cutting out the middlemen where appropriate.

Initially I used Which? Switch but I now have so few companies on my accceptble short-list I go straight to their websites. However, the scale of the switching going through the major comparison sites, evidenced by the huge amounts they are taking in commissions, shows that most people are using one of the top five. Perhaps the free toys and other inducements really do pull the punters in – and they probably didn’t realise they were being short-changed. Which? should blow the whistle on this too – trouble is, its own hands are not quite as clean as I thought they were.

I use whichswitch find the best deal then go thru a cashback site and get even more savings 🙂

Malcolm R

There is definitely a need for price comparison sites (not just for Energy) and it is fair that they have to make money. Although I like the idea that there is a social element and maybe should get public funding but knowing the inefficiency and inability exhibited by most other Quangos, I’d rather they all kept clear of the Comparison sites.

But what must be changed is the apparent hiding of the best deals. Either they must clearly state that they have excluded some providers from the comparison or they should be included.

Terfar’s comment on using a cash-back site to do tthe switch is the practical application of concentrating on good value. However for subscribers to Which? I think there must be an element of pain to think we do not get the service included in our £120 a year.

Or am I missing something here – it is free to all is great but making membership to Which? more beneficial would be a good idea.

It may be that the costs of running Which? Switch are covered by the charges. I am well aware that some of my membership subscription is used to fund the substantial amount of publicly available material on the Which? website. I’m very comfortable with this and strongly support Registered Charities doing things for the public benefit. Obviously it encourages new subscribers. Making some available and some restricted to members is a much better approach than the free prize draws Which? used to use for marketing.

I would certainly appreciate more members’ benefits. Maybe there is an opportunity for Which? to invite companies to offer discounts to members for their products and services, as many of the larger membership organisations already do. Having said that, energy is one area to avoid, in my view. It’s complicated already, which is why we are having this discussion.

I don’t see that Which? would be seen as totally independent and unbiased if it arranges benefits for its members. Which? isn’t given (or loaned) products to test as most reviewing organisations practice. Which? buy everything anonymously from normal retail sources as we do. Negotiating member discounts or benefits would suggest that a company is buying favourable reviews. This would taint Which?’s reputation.

Although I read reviews in other publications and on line (like Trusted Reviews), I never give their ratings with same weight as Which?

The way that Which? conducts testing has long been one of its strengths. After Dieseltaylor suggested members’ benefits I wondered about Which? inviting discounts. I take your point about the need to retain independence but maybe something like the National Trust or the Wildlife Trusts or other organisations with Which? is unlikely to have involvement.

I don’t feel the need for this but many see membership benefits as very important.

Testing is actually a bit of a sore point as I do not consider it as good as it could be in some product areas – particularly small appliances where there are complaints that Which? Best Buys are not tested for longevity in use.

I have suggested that to cover this defect that members are used as the long term guinea pigs because with their membership and number better results could flow. if a member buys an item they can input or scan the purchase docket and then report usage and problems at 6 monthly intervals – or less judging by the Logiks Steamer reviews.

So members can feel good about supporting the charity by providing unique data aswell as support it financially. There of course be built-in carrots and honourable mentions to acknowledge the value of the work. I know that many many members are long term supporters who I am sure would relish the involvement.

dieseltaylor, Which? Connect regularly surveys members about products and services. Perhaps a good place to ask members for this information? I would quite happily submit the durability of products – particularly electrical – that I have to help build a picture of different products.