Initial CMA Inquiry Findings Reveal Worrying Trends for Energy Customers
As regular readers here at the Love Energy Savings news centre will already be well aware, we have been following the CMA investigation into the energy market ever since it was announced last summer.
As an company committed to adding some fairness and transparency to the sector, we applauded the fact that the authority had seen fit to assist Ofgem in trying to ascertain exactly where the problems in the market lie, especially with regard to the Big Six.
As such, we were delighted this morning to learn that the first conclusions have been drawn from what has turned out to be a pretty extensive probe. So, what can energy customers learn from the findings so far?
Dual-Fuel Customers The Hardest Hit
Ultimately, and this comes to no surprise to us or indeed to many energy consumers, dual-fuel customers have been missing out on significant savings by remaining with their current energy supplier. This is something we have harped on about until we are blue in the face here at Love Energy Savings and we are therefore pretty chuffed that the CMA has seen fit to reiterate our point.
Data has been analysed for the period of 2012 to 2014 and the startling fact of the matter is that a colossal 95% of dual-fuel Big Six customers could have saved money by switching supplier or tariff. Although we are predominantly concerned with saving commercial energy customers money, this is the case for all energy consumers and the statistics for domestic customers seems to hit the same point home. The time to switch is now.
Through failing to make these savings, it is thought that energy customers have missed out on savings ranging from £158 to £234 per year.
“We are obviously very happy indeed that the CMA has seen fit to publish the first of its conclusions following nearly a year of investigation. We have been looking to urge the vast number of energy customers who have not yet switched to review their energy deals for years now, hopefully this news will spur more businesses and homes to make the savings they deserve” said Phil Foster, Managing Director of Love Energy Savings.
Why Was The Probe Launched?
The energy watchdog Ofgem first launched their investigation into the Big Six energy firms, which count for 92% of the energy supply market, due to a growing theme of discontent both from home and business energy customers. Although these suppliers are still hugely dominant in the sector, more and more customers have been looking to the rising, independent energy providers due to their flexible products and often, more attractive pricing.
As well as the usual issues around energy prices, perhaps the more concerning aspect is that the Big Six energy suppliers continue to be criticised for poor customers service; with some providers faring a lot worse than others. Indeed, between 2007 and 2013, complaints against the larger suppliers has increased by five times. Customer care, billing and payments account for the majority of the issues, indicating some serious infrastructure problems at these companies, despite the profits they are recording.
Sticky Energy Customers
A fresh theme that has been revealed as a result of the CMA investigation is that of sticky customers. These are energy customers who have been passed to energy suppliers following the privatisation and have therefore not made a conscious decision to choose their supplier.
Not only have they never switched supplier, they are likely to have never even discussed their tariff. This is another issue close to our hearts at Love Energy Savings, as this will mean that there is an extremely strong chance that these ‘sticky’ customers are on expensive, standard rate tariffs. These customers are wasting millions of pounds when combined, without realising how easy it is to switch and reduce their bills almost immediately.
As is usual when issues such as these arise, Secretary of State for Energy and Climate Change, Ed Davey, has had his say on the issue and has commended the CMA’s focus on sticky energy customers. Switching times will continue to be a focus for the government and consumers should also look out for switching campaign advertising.
Nearly half of energy customers in the UK have been with their incumbent supplier for more than a decade and for one supplier, this rises to nearly 70% of customers. These consumers are simply throwing money away when it comes to their gas and electricity bills.
The most worrying thing about this trend, according to the CMA, is that these energy customers are likely to be "less educated, less well-off, more likely to describe themselves as struggling financially, less likely to own their own home, less likely to have internet access, more likely to be disabled or a single parent".
This is compounded by the fact that these customers are also more likely to see switching energy suppliers as too much of hassle, despite it being possible in a matter of minutes via a transparent and honest energy comparison site such as ourselves. The CMA will now be performing research into just why energy customers see saving money on their energy as so unimportant or perhaps too much of an ordeal.
One of the key reasons for the probe into the Big Six energy suppliers being initiated in the first place, was to do with their profits. At present, the CMA is yet to form a consensus on this as they are “continuing to look at whether overall profit in energy retail has exceeded an appropriate benchmark".
The authority will also assess claims that Ofgem has made things worse for energy customers by reducing the amount of tariffs available.
Any break-up of the Big Six energy firms is currently though to be pretty unlikely, as had been suggested by some critics. At present there is no evidence to suggest that they have been making excessive profits from electricity generation or that wholesale pricing has been reported with a lack of transparency. This is despite the firms’ failure to pass on savings from wholesale gas prices earlier in the winter.
If this article has concerned you regarding your domestic or business energy, then please do get in touch. We have impartial energy experts ready and waiting to take your call and you can find your cheapest supplier and/or tariff instantly by putting your postcode into the box at the right or bottom of this page. We are looking to make a big difference by making your life easier, and this starts with saving you money today!