UK Households overpaying by £6bn on Energy Every Year
We all know we pay too much for energy, but with such a homogenous product and complicated market what can be done to help customers?
The Sun newspaper has launched a campaign to help UK households save “£6bn” in Energy costs a year, which they argued the Big Six were over charging UK consumers.
THE Sun today demands a crackdown on the Big Six energy firms to stop them ripping off hard-up families. Seven in ten…www.thesun.co.uk
The crux of the problem is that about 70% of UK consumers are known as “non-switchers”, i.e. they have not switched their energy supplier in several years and are stuck on ‘Standard Variable Tariffs’ which are much more expensive that fixed term deals offered to “switchers”.
The Competitions and Market Authority have identified this ‘tale of two markets’ and have come up with some proposals to try and help customers. However, they all focus on trying to encourage customers to switch more. In particular, those least likely to switch who are often disproportionately likely to be vulnerable or elderly households, on lower incomes, less educated, or have poorer access to technology.
One of the clear narratives emerging from Theresa May's speech at the Conservative Party conference this week was that…policyexchange.org.uk
It seems to me that people who don’t switch now (i.e. most of us) are unlikely to be significantly more likely to switch energy suppliers because of a few tweaks made by the CMA.
There are many reasons why we don’t switch our energy supplier, ranging from the fact that we may trust our current one, we may have had a bad previous experience with others, and we are almost certainly wary of the fine print we agree to when switching. As ever, if customers find energy pricing confusing, how are they able to enter in to new contracts with confidence?
Instead there needs to be radical new approach to the energy retail market in the UK. One that recognises the fundamental nature of the market; that energy is homogenous, customers find pricing confusing, and the current structure between Price Comparison Websites and Suppliers is not fit for purpose.
There is an asymmetry of information/power between the seller (the Big 6), the market place (the Price Comparison Websites), and the customer. Therefore, there needs to be a new model where the interest of the consumer is paramount and the long term interest of the customer is advocated.
This will take time and will be difficult to achieve, but if done correctly it could save UK customers an estimated “£6bn” a year and still support innovation within the UK energy sector.
