Dual fuel customers would save by switching

18 February 2015, 14:29   By Samantha Smith

Almost all customers - 95% of them - with a dual fuel energy tariff from one of the Big Six suppliers could have saved between £158 and £234 a year by moving to a different company.

dual fuel energy monitor
Credit: Shutterstock.com

That's just one of the early findings of the Competition and Markets Authority (CMA) investigation into the energy retail market.

Their figures also reveal that average revenues from standard variable tariffs are 12% higher than those for other electricity tariffs, and 13% higher than for other gas tariffs.

Meanwhile they say that between 2009 and 2013, average prices have risen by 24% for electricity and 27% for gas.

What about price cuts?

In January this year, the Big Six energy providers each announced price cuts for their variable tariff gas customers, ranging from a reduction of 1.3% from EDF - the cheapest of the Big Six - to 5.1% from Npower.

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British Gas, who announced a 5% cut effective from February 27th, remain the most expensive of the six.

The response from Citizens Advice was that the cuts were too little too late: not only were they minimal, but only one company - E.On - brought in their lower price immediately.

The other five chose dates ranging from mid-February (EDF) to the end of April (SSE) to bring in their new prices, when the worst of the winter and the greatest demand for gas for heating will be over.

British Gas defended the size of the cut by saying that wholesale energy prices, which have dropped by around 20% since autumn 2014, only make up around half the cost of the customer's bill.

Who's affected?

There are around 27 million electricity customers and 23 million gas customers in the UK, with around 19 million taking both fuels from the same provider.

Meanwhile, between 50% and 90% of customers with the Big Six are on standard variable tariffs - often with the same supplier they've had since they moved into a property.

In fact, between 40% and 50% of customers have been with the same energy company for more than a decade.

Despite campaigns to raise awareness of the rights of tenants to switch - including Ofgem's own Be An Energy Shopper - it still remains that more than three quarters of people living in rented accommodation have never moved provider.

Among the submissions to the CMA was one from pre-pay provider Utilita, which pointed out that the Big Six tend to charge more for their energy in what would have been their home region pre-privatisation than they do elsewhere in the country.

This is partly because they rely on sticky customers - people who don't switch, for whatever reason - to help subsidise their lower costs and tariffs elsewhere in the country.

But the grip of the Big Six is gradually loosening.

Thanks in part to those awareness campaigns, smaller independent energy providers have seen their share of the market grow quickly.

In July 2011, independents accounted for just 1% each of the gas and electricity markets, but three years later, they made up 7% of the electricity market and 8% of the gas market.

But it's also because they've priced themselves competitively - offering deals that are the same price or cheaper than those from the bigger providers - to remain in business.

Customer complaints

Meanwhile complaints about energy suppliers continue to rise.

As part of its investigation, the CMA asked the Big Six to provide information on the number of complaints they received, and what those complaints were about.

Between 2007 and 2013, that figure rose fivefold, with billing issues at Npower and Scottish Power fuelling the increase.

These problems were also the reason for the number of complaints reaching the Energy Ombudsman doubling between 2013 and 2014.

In addition, the level of trust people have in energy companies is decreasing, thanks in part to price rises and the failure of the suppliers to pass on lower wholesale costs - and increased media scrutiny.

But most customers seem to trust their own provider far more than others - which could be another reason so many are failing to switch despite the savings on offer.

The CMA plans to look at the issue of wholesale costs in the next part of the investigation.

The investigation continues

Their inquiry began last summer, following a referral from Ofgem.

The regulator was concerned that competition in the market wasn't working properly - that is, it wasn't serving the best interests of households and small businesses.

We looked at some of the early responses in October last year.

Since then there have been nine hearings, with participants ranging from the Energy Ombudsman and Ofgem to Citizens Advice, and the former head of the Office of Electricity Regulation, Professor Stephen Littlechild.

Meanwhile submissions continue to come in, with the number of responses from interested parties now at almost 60. They've come from suppliers large and small, generators such as Drax, MPs, and consumer organisations.

The deadline for further responses is only a few weeks away, after which the CMA will start work on its initial report, outlining more of its provisional findings and suggesting solutions to the problems it finds.

The final report isn't due until November 2015 at the earliest, so it's unlikely the energy market will change any time soon - but it does at least look like the CMA knows something needs to be done.

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