May 21 2013 Latest news:
Adam Aiken, Editor
Thursday, April 12, 2012
The government has come to a “deal” with the largest domestic energy providers which will see customers contacted at least once a year to be told of their suppliers’ best tariffs.
The move comes amid ongoing concern that millions of households are paying way over the odds for their gas and electricity, with the government concerned that not enough is being done by the providers to help consumers.
British Gas, Eon, Npower, Scottish and Southern Energy, EDF and Scottish Power – commonly known as the Big Six – have agreed to the move, which the government claims could save customers £100 a year.
But is this a serious step forward or simply a gimmick that creates headlines without making a significant change to the market?
The plan – which will also see suppliers contact their customers at the end of any fixed-rate contract – fails to address the inertia among consumers of switching between suppliers.
Until this “can’t be bothered” attitude is done away with, the energy companies will continue to have millions of customers on their books paying through the nose for something they can get much cheaper elsewhere.
As a rule of thumb, the authorities stepping in is usually a sign that the existing system hasn’t worked, and that is certainly the case here.
However, the truth is that we all share some of the blame.
After all, if we made looking for the best deal a regular thing, market forces would have a better chance of working and there would be less need for such intervention.
There was an “energy summit” a few months ago, with Chris Huhne, then the energy secretary, coming out afterwards to recommend we all look for a better deal by switching supplier. Too few of us heeded that advice.
This latest move by deputy prime minister Nick Clegg should once again help focus some people’s minds – the fact that the issue is back in the headlines is likely to prompt a few to take action.
But history suggests the situation is likely to stay the same for millions of householders who just do not seem bothered enough to switch, even though the savings could be substantial and ongoing.
Energy prices have more than doubled in the past seven years and while we are very quick to jump up and down when the likes of British Gas make huge profits, we are not so good at taking basic action to take back some of that cash.
If you have never been through the process, you could save hundreds of pounds a year by moving. And you don’t have to go through the process of telling your existing supplier that you want to leave. If you use a switching service, all the work is done for you.
There are occasional horror stories about switching procedures that go wrong, but the good news is that these make up a small minority of cases. There is little excuse for inaction.
However, the energy companies have brought this further regulation on to themselves.
There are more than 120 tariffs available. Older people – particularly those who do not have internet access – often say how confusing they find the whole thing, and it’s right thatsuppliers should make things clearer for their more vulnerable customers.
Meanwhile, questions are raised too often about energy companies’ sales tactics, including cold-calling.
There are regular complaints about the speed at which they put their prices up and the sluggishness with which they cut them.
And one of the Big Six was stung by a £2m fine a few months ago for the way it dealt with customer complaints.
So, will things get better?
Audrey Gallacher, director of energy at Consumer Focus, said: “Transferring customers to the best deal when their contract comes to an end, rather than the more costly standard tariff, is a long overdue step.”
But she added: “While any move to help energy customers to get the best deal is welcome, it has to be the right method to reach people and the benefit must outweigh the cost.
“This needs to be more than a one-off mail shot and part of a wider strategy to help people overcome the burden of having to navigate hundreds of complex tariffs to get a decent price.
“Unfortunately people don’t trust energy firms and previous mail-outs have not always had the best take-up.”
In other words, this move is a start. But unless more people make the effort to look for a better deal, the days of soaring prices look set to stay.