James Moore: Energy companies have a real problem with customers - trust


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The Independent Online

Outlook Even if the Competition and Markets Authority (CMA) ultimately finds no evidence of collusion among the “big six” energy companies, its investigation has unearthed some ugly things. The headlines in the wake of its catchily titled “updated issues statement” have focused on the huge savings that customers could have reaped by either switching their suppliers, or finding cheaper tariffs, or both. That’s understandable when 19 million “dual fuel” electricity and gas customers have each been missing out on between £158 and £234 that they could surely put to better use than lining the pockets of their energy suppliers; all for half an hour’s work with a mouse and a computer keyboard.

It would be very easy at this point for the energy companies’ defenders to say more fool them if they can’t be bothered to make the effort. But it isn’t that simple. To take advantage of switching you really need to be computer literate, confident with using the web to make transactions and willing to scratch, kick and bite if things go wrong (given the energy companies’ well-deserved reputation for dreadful customer service, the latter is a real possibility).

Not everyone is computer savvy. At a recent meeting, I was told by a retailer that its research had revealed that a third of people shop on the web, a third use it but won’t transact, and a third don’t use it at all.

Moreover, it is the most vulnerable in society who are typically in the latter category. In other words, the people with limited means who would benefit most from switching aren’t in a position to do so. And it isn’t necessarily because they won’t but because they can’t.

Drill down into the report and the nasty truth of the energy suppliers’ behaviour towards these people becomes clear. It isn’t quite true that they use their poor customers to subsidise the rich, who are more likely take advantage of cheaper, fixed-term deals. Energy providers still make profits on most of the latter. It’s just that the profit margins are generally lower.

But they are exploiting them. From what the CMA is saying, the pricing of the standard variable tariff is informed by the fact that energy companies are aware that the people on it will stick with it and with them. While the CMA believes that various regulatory initiatives – from regulator Ofgem – are distorting the market, it will probably require more of them to address this issue.

There will doubtless be howls of outrage from the energy companies if this comes to pass. But here’s their big problem: Ofgem has so far surveyed 7,000 energy customers as part of the research for this exercise; what it found was that trust in energy companies is lower than it is in mobile phone companies and car insurers. Incredibly, despite widespread mis-selling of various products (start with payment protection insurance), government bailouts and an addiction to bonuses that are all but impossible to justify on any rational grounds, trust in energy companies is lower than that in banks. This is a sector with a real problem, and there is scant value in politicians playing nice with it. It might not even matter what the CMA says at the end of the process. The energy companies are set to reap the whirlwind. Good.