Energy price war masks service woes
As Scottish Power and E.ON release bargain basement deals this week, Simon Read looks at how energy firms are still failing us
Saturday 26 September 2009
Are the energy firms letting you down? Two damning reports published this week suggest that service is poor and bills are too full of jargon to understand. None the less, the big six firms have been busy slashing prices in the last few days to counter the challenge from new entrants. If you haven't switched gas or electricity supplier recently, it means there could be some powerful reasons for doing so.
That's especially true if you snapped up a fixed rate deal last year when they soared in popularity. In fact, four fixed tariffs from the big six energy providers are due to end next week. EDF's Price Freeze 2009 and Scottish Power's Fixed Price Energy 2009 end on Wednesday, September 30. Meanwhile E.ON's Price Protection v16 and v17 finishes on Thursday, October 1.
"By choosing a fixed energy tariff 12 months ago, customers saved themselves an average of £214 a year against a backdrop of sharply rising prices," says Scott Byrom, a gas and electricity expert at Moneysupermarket.com. "However, it is important people realise that once these fixed deals come to an end, their provider will automatically transfer them onto an alternative deal, which may replicate standard deal prices."
Depending on which deal you are currently on, switching could prove an expensive move. Those on Scottish Power's Fixed Price Energy 2009 and E.ON's Price Protection v16 and v17 could see their bills jump by £56 a year on average, for instance. However, the prospect is more positive for those on EDF's Price Freeze 2009 as they could see their bills actually fall by £21 a year.
"My advice to customers who have fixed deals expiring soon is to look to swap at least four weeks before the termination date to avoid automatically moving to what could be a more expensive tariff," suggests Byrom.
In fact, there has been a lot of good news on prices recently. Since the beginning of the year average energy prices have fallen £54 or 4 per cent. And, this week, competition became keener than ever.
Gareth Kloet, head of energy at Confused.com, says: "In a move suggesting that the big six are still more concerned with competing with each other and are not feeling the heat from the up-and-coming companies challenging them on the best-buy tables, Scottish Power released a new table-topping tariff on Thursday.
"On the back of E.ON's change to the discount structure of its FixOnline 3 tariff on Wednesday, Scottish Power responded with a new Online Energy Saver 7, best buy in five of 14 regions, making them the cheapest in the UK, on average, of the big players at £975 per year. The new tariff, open to direct debit and online customers only, is 3 per cent cheaper than its standard plan. It beats competition from small player Ovo Energy, but ignores the threat of First Utility, which remains the cheapest in nine regions, and the cheapest overall at £967."
Byrom echoes the view that the big firms are failing to compete on price with the newcomers. "This week's moves by the traditional big providers has done little to challenge the newcomers to the market. The smaller providers threw down the gauntlet from the off and have maintained the most competitive deals in the market. With battle lines drawn, UK consumers face a choice of "brand versus price" and will now have to decide what is more important."
However, while it's tempting to simply buy on price, it is worth learning the lesson from others' experiences when you are choosing which company to buy your gas and electricity from. Buying bargain energy could be a false economy if you end up getting annoyingly bad service.
In fact, only just over half of people are happy with the service they get from their energy company, according to a survey from uSwitch.com. Its Customer Satisfaction Report questioned more than 5,000 energy users with only 52 per cent saying they are happy with their energy firm.
Npower was named the worst supplier for the second year running, offering satisfactory service to only 54 per cent of its customers. At the top of the table, however, is Scottish and Southern Energy which won the consumer vote for the sixth time in a row.
Ann Robinson, consumer policy director at uSwitch.com, says: "Last year's hefty price increases damaged the public's perception of energy suppliers. As a result, the industry saw a drop in satisfaction levels. This year, suppliers are starting to get back on track, winning customers over by cutting prices and bringing out competitive new plans. But if they are to make a real dent they have to focus on customer service – just 52% of people are happy with customer service, which is poor by any industry's standards."
She says that with such clear differences between suppliers, there is no excuse for people putting up with bad service. "If you are not happy that you are on the best deal or getting value for money, speak to your supplier," Robinson advises. For example, according to uSwitch, only around 1.3 million, or 5 per cent, of households are on online energy plans and therefore paying the cheapest energy prices in the market.
But part of the problem could be that people simply don't understand their charges or their bills. That's the conclusion of a Which? survey, also published this week. It said energy bills are full of jargon and leave customers struggling to understand how much they owe.
And when the company submitted a selection of energy bills to the Plain English Campaign, they were described as being peppered with "gobbledygook". Terms like "calorific value" and "normal primary units" were some of the jargon found on the bills, and, confusingly, one even used a minus sign for a credit amount.
Martyn Hocking, editor of Which? magazine, says: "When you hear the term "calorific value" you're more likely to think about a diet than your energy bill. This makes it a struggle for customers to understand their bills. Consumers aren't going to be able to reduce their energy use or find the best deal if they don't understand what's going on."
Which? is calling for better bills, with an itemised summary box so consumers can see key information at a glance. It is also demanding transparency on estimated bills and meter readings, and simpler tariffs. But with its customer satisfaction survey also pinpointing Npower as the worst performer, it's clear a greater focus on service is needed urgently.
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