Tuesday, 8 December 2015

edge games for energy tariffs


At the start of 2014, four years after they started a Retail Market Review, Ofgem forced UK energy suppliers to introduce a new tariff structure for retail customers. It was claimed to create a simpler and clearer market, removing confusing and complex tariffs to help rebuild consumer trust.

It was built around suppliers offering just four tariffs per customer for both electricity and gas and to help customers get the best deal.

It makes a great example of the law of unintended consequences.

Take my current well-known supplier as an example. If I forget to switch to their new tariff at the end of the one year period, instead of being put onto their new 'best for me' tariff, I automatically get switched onto their worst tariff.

That's about £350 per year worse than the previous tariff. Of course, they don't call it 'worst' tariff because that would alert me. No, they call it their 'standard' tariff, which somehow implies it is what they give to a lot of, well, standard people.

A well-organised person might arrange to pre-switch to the next best tariff, but I bet there's plenty of consumers who don't take any notice and through inertia (aka accidental loyalty) get moved to the lazy and expensive tariff. I calculate it charges about the equivalent of a Netflix plus a Spotify plus an Amazon Prime annual subscription extra, per annum.

The number of tariffs hasn't tracked to the number of years either. I notice we are already up to 16 variants of electricity and a further 16 variants of gas billing since the new rules came in back in January 2014.

The Ofgem principle was about 'Treating customers fairly and profit was not an entitlement'. Although Ofgem has taken some steps in the right direction, the utility suppliers have still been pretty good at playing the edges.

I notice in the 2015 Which report about energy companies that the most well-known names are all in the bottom half of the satisfaction survey. I'm not sure that 50% happy is anything to be proud of.

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