Energy suppliers fail to explain ‘simple’ tariff rateWhich means you could choose the wrong energy deal
19 November 2014
Energy companies are failing to properly explain the regulator's new price-comparison tool to consumers. When we called 13 suppliers six times each – a total of 78 times – we were provided with accurate information in only four (5%) of our calls.
When we called the energy companies in July 2014, we asked them to explain the Tariff Comparison Rate (TCR) – introduced in April by regulator Ofgem, this is a single rate that tells you how much a tariff costs per kilowatt hour, based on medium usage.
It’s important that energy firms can explain TCR accurately, because simply choosing the lowest TCR doesn’t necessarily mean you will pick the cheapest deal for you - as your energy use may differ from a medium user.
We are calling for energy suppliers to adopt simple pricing, presented in the style of a petrol forecourt display, so people can more easily compare tariffs and find the best deal for them. And we need your help. Please add your voice to our campaign - click to sign and to find out more about our Fair Energy Prices campaign.
What is TCR?
Similar to an APR for credit cards, the TCR tells customers how much a tariff costs per kilowatt hour (kWh) based on medium usage. It is intended as a guide to help consumers compare tariffs.
Based on the regulator's description of the TCR, we think consumers need to be told the following four points to prevent mis-buying:
- The TCR is based on average/ medium energy consumption
- It is a guide only, to help consumers compare the price of tariffs
- It combines the unit rate, standing charge and any discounts into one figure
- The tariff with the lowest TCR is not necessarily the cheapest for you
Our own research, conducted in March, shows that consumers are confused about the TCR: just three in ten consumers (28%) got the right answer when asked to identify the cheapest deal from a range of tariffs using the TCR.
We also found that when the tariffs were presented in our simple pricing format, the number of people selecting the cheapest tariff shot up to eight in ten (84%). This is why we are calling for energy suppliers to adopt simple pricing.
Call to action
Which? executive director Richard Lloyd said: 'If the energy companies can’t even explain how to accurately compare tariffs then their customers stand no chance. It is clear suppliers need to up their game and ensure they can provide consumers with a clear and accurate explanation to help them find the best deal.
'Energy pricing is still far too complicated, which is why we want the government to introduce simpler pricing, similar to petrol pump displays, so people can spot the cheapest deal at a glance.'
We will be sharing our results with the energy suppliers and asking them to up their game and ensure their advisers are trained in explaining the TCR clearly to consumers.
In the mean time, to make sure you choose the best tariff for you, only use the TCR as a guide and always get quotes based on your own energy consumption. A comparison website like Which? Switch will compare all the deals available on the market for you to your specific needs.