13th April 2015
A new report by CentreForum, has revealed the chief reason behind the falling levels of energy switching activity in the UK – namely consumer confusion.
The independent think-tank’s analysis entited Reforming Retail Energy Markets, commissioned by comparethemarket.com, found that the complexity of energy bills is a major cause of bewilderment, significantly harming people’s ability to get the most competitive deals. The report has been shared with Ofgem, the energy regulator.
Comparethemarket.com has called on Ofgem to make it a legal requirement for energy providers to send all customers an annual review notice, or ‘trigger’, to encourage people to check that they are on the best tariff and has proposed a form that this trigger could take.
This notice would be sent to all customers, not just those that are coming to an end of a fixed rate tariff, as is currently the case. This draws upon the precedent of the motor insurance market where an annual trigger exists. The fact that motorists often make annual comparisons, has been a key driver in increasing competition and lowering bills.
Comparethemarket.com is recommending a clear, standard format for the annual energy trigger and has also created a simpler template for energy bills which it believes should become the standard across all providers. This would include only the most important information and minimise consumer confusion.
James Padmore, head of energy at comparethemarket.com described the report as underlining “the fact that the energy market is broken”.
He said: “Consumers struggle to make sense of energy bills and too many remain on uncompetitive tariffs because they are unsure of how to compare deals based on their current usage and expenditure.”
The firm estimates that if everyone moved to the best energy tariff for them, the ‘energy dividend’ back into the pockets of UK consumers would be in the region of £4bn – an indication of the overpayments caused by automatically rolling on to standard tariffs and not reviewing bills.
“This is why we have created templates for an annual renewal notice and a simplified and standardised bill. These are designed to remove confusion by making things simple and clear,” added Padmore.
“Consumers need to be able to compare tariffs like-for-like and make informed decisions about the best deal for them – the report we have commissioned clearly shows that, at present, the energy industry falls woefully short of this requirement.”
Tom Papworth, associate director for economic policy at CentreForum and author of the report added: “The obfuscatory way that information is presented by energy companies acts as a significant barrier to switching supplier. Customers frequently complain about receiving too much information, and having too much choice, rather than too little. Bills are complex and like for like comparisons difficult. An overhaul of some of Ofgem’s Retail Market Review recommendations would therefore clearly benefit consumers.”