Gas and electricity Updated:
Think you're paying too much for your gas and electricity? Well, you probably are. Energy customers have missed out on big savings in the past few years by failing to switch suppliers, an investigation by the Competition and Markets Authority (CMA) has revealed, and the savings could have been marked.
The CMA has been investigating the energy market since last summer, following concerns by industry regulator Ofgem that the dominance of the six key energy providers (SSE, Scottish Power, Centrica/British Gas, Npower, E.On and EDF Energy) meant competition wasn't working as well as it should. A statement outlining the early findings of the investigation has just been released, and so far, those concerns seem justified.
Comparing all available domestic energy tariffs, the CMA found that 95% of dual fuel customers with the Big Six could have saved money by switching tariff and/or supplier between 2012 and 2014. Doing so would have meant they could have each saved, on average, between £158 and £234 a year (depending on the supplier), and those switching from standard variable tariffs were likely to save the most.
Between 50% and 90% of Big Six customers are currently on standard variable tariffs, but the question is, why? The investigation found that the Big Six typically earn 12% more from electricity and 13% more from gas if their customers are on standard rather than fixed tariffs, so anyone still on these tariffs is paying far more than they need to.
This isn't helped by the fact that many Big Six customers are inherently loyal. Between 40% and 50% of customers have been with their supplier for 10 years or more – one supplier has even managed to keep around 70% of its customers for more than 10 years – meaning a huge number of people have missed out simply by failing to consider their options.
It isn't just high prices loyal customers have to contend with – it's also poor service. The number of complaints received by the Big Six increased fivefold between 2007 and 2013, and perhaps unsurprisingly, problems related to billing, customer service and payments accounted for the majority of complaints. Meanwhile, complaints to the Energy Ombudsman – where things couldn't be resolved by the supplier – more than doubled between 2013 and 2014 alone, largely driven by increases in complaints concerning billing.
Mark Todd, director of comparison site energyhelpline.com, commented on the investigation: "We aren't surprised by these early findings from the CMA. Loyalty, quite simply, does not pay. Consumers who fail to switch are only lining the pockets of the suppliers, by around £200 extra per year. People need to take action sooner rather than later to ensure they pay an appropriate price for energy.
"Unfortunately, many of the customers who have stuck with standard deals from the Big Six are those who could benefit from the savings the most. Vulnerable people including pensioners and the disabled are less likely to switch (according to the CMA). This is due to lack of internet access or the perceived hassle that switching may entail, and perhaps these customers are less aware of the possible savings.
"Our message to people is don't accept poor value for your energy – fight back by abandoning loyalty and switching to the cheaper tariffs that are still available."
If you're one of those customers who's yet to make the switch, it could be time to consider it. Even swapping from a standard variable tariff to a fixed rate could save you huge amounts of money, and if you start to think outside the box and move away from the Big Six, you could find that the price you pay, and the level of service you receive, will improve.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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