Comment: ‘Price to beat’ points to fair deal

Trust in energy companies among consumers is at rock bottom, writes Richard Lloyd. Picture: PA

As THE nights start to draw in, many of us will begin to wonder when the heating will need to go on again.

With the average annual household bill now upwards of £1,300, and rising, this will no doubt cause more than a little consternation in some homes.

In fact, stressing about heating bills seems to be an all-too-common concern. In the latest Which? Consumer Insight Tracker, three-quarters of Scottish people (77 per cent) say they are worried about energy prices.

One in five (22 per cent) said they don’t know whether they can afford to heat their home this winter, and only a fifth (22 per cent) believe that competition between energy companies currently drives down prices for consumers.

Energy bills are the number one consumer concern and have been for at least two years now. Yet we also know that switching levels remain lamentably low and that, as a result, more than 60 per cent of us are stuck on standard tariffs that tend to be among the most expensive on the market. This is why we have launched our new “Fair Energy Prices” campaign, calling for changes in this market which has such an impact on our household finances.

We think Scottish consumers should be able to trust that the price they pay for energy is fair, even if they don’t switch tariff or supplier, so our new campaign is calling on the Competition and Markets Authority (CMA) to investigate the best way for the regulator to establish a “price to beat”. We believe that people need a credible, independent benchmark against which to compare prices. Energy suppliers would compete against this “price to beat”, which would be set and regularly updated by the energy market regulator.

This would not be a return to full price regulation, rather it could take a number of forms. Similar models already exist in parts of the US and Northern Ireland and appear to be working well.

We are also calling for energy suppliers to be required to use simple, directly comparable pricing, similar to petrol pump displays. The benefit of this is that people can more easily compare prices and make the best choice if they choose to switch. Energy companies need to introduce simple pricing if they are to increase confidence in their industry and encourage competition by boosting switching levels.

It can’t be right that most consumers are so disengaged from this market that they worry about energy bills but then don’t go on to switch to better deals. “Sticky” customers are a sign that more competition is needed to force suppliers to fight for our business.

It is no surprise that consumer trust in this sector remains at rock bottom, especially over the size of our bills.

Our latest research reveals just 11 per cent of Scottish people trusts their supplier to charge a fair price for their energy and two-thirds (64 per cent) say it is difficult to compare the prices of different energy deals.

We found that just 10 per cent of Scots trust energy companies to act in our best interests, and only a quarter (23 per cent) rate their supplier for offering them a fair price.

It is also no secret that the energy market is in a bad way and is not working for Scottish consumers. It has been referred to the CMA for investigation and there is a seemingly endless stream of enforcement action being taken by Ofgem against the big suppliers which dominate this market. Our most recent customer service survey of 100 of the UK’s biggest brands had Scottish Power in 99th place, with Npower at the bottom.

All of the big suppliers languished in the bottom fifth of the survey, with none of them scoring more than two stars out of five in our survey for making customers feel valued. This simply is not good enough for a utility we must all rely on.

The current status quo is serving consumers poorly. We believe that big changes are needed to reform this broken market in Scotland and throughout the UK.

Urgent action by the Competition and Markets Authority (CMA), Ofgem and above all our biggest suppliers is necessary if we are to restore customer confidence in this essential sector. Where better to start than ensuring people have trust that the price they pay for their energy is fair? People can support our campaign for Fair Energy Prices at http://whi.ch/F4IR3NERGY

• Richard Lloyd is the executive director of Which? which.co.uk

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