Energy deal lottery leaves consumers out of pocketGetting the best tariff can be a game of chance
24 September 2010
A lack of transparency around better deals, lengthy contracts that lock in customers, unreasonable time lags between switching suppliers, and late notification of price changes mean that many consumers could be paying more than they need to for their energy.
Which? research has found that one in three people think energy companies can’t be trusted to sell them the right energy tariff. Consumers could save hundreds of pounds a year if their energy company informed them about cheaper tariffs available – but a lack of information means many could be missing out.
Big savings – if you can find them
In the East Midlands, for example, the price difference between version one of EDF Energy’s Online Saver and version seven is £151, and one Which? member discovered he could save £400 a year by moving to his supplier’s cheapest tariff.
Energy companies regularly introduce new tariffs to attract new business. Which? found that Npower’s Sign Online is now in its nineteenth version, and British Gas’s WebSaver and Scottish Power’s Online Energy tariff have reached their ninth and eleventh incarnations respectively. None of the energy suppliers actively inform customers that a newer, cheaper version of their tariff is available.
Instead consumers have to navigate their own way through an overwhelming range of tariff choices. The consumer champion found that a typical household in the East Midlands has as many as 89 tariffs to choose from.
Rollover energy contracts
Which? also found that some suppliers have a policy of ‘rolling over’ customers’ contracts if they don’t hear from the customer before the contract ends. This means consumers who’ve signed a contract to fix their prices for a year can end up either stuck with their supplier for another year or having to pay a hefty exit fee to get out of the contract.
British Gas and EDF Energy said they do this (although, to its credit, EDF Energy does give unsuspecting customers a month’s grace after the rollover to switch to another deal or supplier).
'Mindboggling' choice of tariffs
In response to the Which? investigation, Consumer Focus' head of energy policy Audrey Gallacher said: ‘The array of energy tariffs is just mindboggling for consumers trying to get the best deal. Suppliers are increasingly luring people in with eye-catching special offers that may not last. Worryingly, suppliers are also locking people into longer deals, often without being completely upfront about how costly it could be to cancel.
'There is no justification for having such a confusing array of complex tariffs. We would urge consumers looking for the best offer to use an impartial price comparison website to see if they are on the cheapest deal and if not, switch.'
Which? is campaigning for minimum standards for energy tariffs to be part of the upcoming Energy Bill that will go through Parliament before Christmas. This week Which? secured a commitment from the government to force suppliers to inform their customers in advance of price changes – up until now they've had up to 65 working days (13 weeks) after the change to let customers know.
Which? chief executive Peter Vicary-Smith said: 'Energy doesn’t have to be complicated, but the practices we’ve uncovered mean many people are paying more than they need to.
'Energy suppliers must make it easier for their customers to find the best deals. This means guaranteeing that customers get the price they sign up to, giving advanced warning of price hikes and telling people when better deals are available.
'The upcoming Energy Bill is an opportunity for the government to set minimum standards for tariffs so that consumers can be confident that they are getting the best deal for their energy.'
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