It has been a cold winter. According to the weather forecasts, February looks to be particularly chilly. At times like this, many people look at the temperature and weather and – it is not too much of an exaggeration to say – are frightened. They will be concerned that ongoing cold weather will mean thinking about having the heating on at a time when energy bills have risen and they cannot afford it. Even for those who may be in a good job, nobody wants to see their energy bills rise.
And yet bills are rising, at precisely the time in the year when people need their gas and electricity. According to Uswitch.com, five of the so-called Big Six Energy companies (EDF Energy, Eon UK, Npower, Scottish Power and SSE) have put up the price of their cheapest tariffs by an average of £135, or 16 per cent. Only British Gas maintained their lowest price.
However, the chances are that you are not on the cheapest energy tariff. About seventy percent of all households in the country are on the standard variable tariff, or SVT, and have never switched their energy provider. You may be forgiven for thinking that standard means something like “round about in the middle of tariffs on offer”. That is not the case. With one or two small exceptions, the standard variable tariff of an energy company is their most expensive tariff on offer. So why isn’t that on your energy bill? Why doesn’t the bill say “You are on our most expensive tariff?”
In the House of Commons, I chair the Business, Energy and Industrial Strategy Committee, and on Tuesday we discussed the energy market. We had the likes of Which? and Citizens Advice, as well as representatives from both the Big 6 and new and smaller energy companies.
Which? said energy companies were “dismal” in respect of prices and customer services. The Managing Director of Npower stated that customers on SVTs are subsidising the cheaper deals, something which common sense tells us always happened, although it is unusual to get senior management from an energy company to admit it.
The answer is clearly to switch your energy provider if you are unhappy with your prices and the customer service. Ofgem, the regulator for the energy market, offers a comparison of SVTs. Uswitch.com is a website that can help you switch, and there are other price comparison websites to help you get a good deal.
However, people are reluctant to switch. I think people think it will be a hassle. They probably don’t know their energy consumption. They may also think that, worst case scenario, they might have their gas and electricity cut off or at risk as they change supplier. Certainly, in respect of the latter point, customers should be reassured that their supply would not be ended if they move from one provider to another.
Nevertheless, I think that loyalty should come with a reward.
Other markets want to keep their customers by giving them a bonus or a price reduction. You go to the supermarket this week, you will probably get a voucher to attract you back. However, as an energy customer, staying with the same company for years, being on their SVT and always paying on time, you’re getting fleeced. If people are reluctant to switch, for whatever reason, I think they should get a loyalty bonus. If you’ve stayed with the same energy company for, say three years, and you’ve always paid on time, why shouldn’t you get a 10 per cent reduction on your bill?
I’m keen for the Select Committee to look at this still further to ensure that energy customers get a good and fair deal.