Energy suppliers fail to explain ‘simple’ tariff

A new Which? investigation, carried out as part of our Fair Energy Prices campaign, shows that energy suppliers are failing to provide customers with the information they need to accurately compare tariffs.

In a mystery shopping exercise, we called 13 suppliers six times each (78 calls in total) asking them to explain the Tariff Comparison Rate (TCR) – the regulator’s new price comparison tool for consumers.  On just 4 calls (5% of calls) were we given accurate information, with only E.ON and npower giving an accurate description of the TCR and then only in two of the six calls they both received.

Similar to an APR for credit cards, the TCR tells customers how much a tariff costs per kilowatt hour (kWh) based on medium usage and is intended as a guide to help consumers compare tariffs. However tariffs with a low TCR might not be the cheapest deal which is why it’s important suppliers can easily explain how it works to customers.

Previous Which? research showed just three in ten consumers (28%) got the right answer when asked to identify the cheapest deal from a range of tariffs using the TCR.  We also found that when the tariffs were presented in our simple pricing format, the number of people selecting the cheapest tariff shot up to eight in ten (84%). Our Fair Energy Prices campaign, is calling for energy suppliers to adopt simple pricing, presented in the style of a petrol forecourt display, so people can more easily compare deals and find the best deal.

Which? executive director, Richard Lloyd, said:

“If the energy companies can’t even explain how to accurately compare tariffs then their customers stand no chance. It is clear suppliers need to up their game and ensure they can provide consumers with a clear and accurate explanation to help them find the best deal.

“Energy pricing is still far too complicated, which is why we want the government to introduce simpler pricing, similar to petrol pump displays, so people can spot the cheapest deal at a glance.”

People can support our campaign for Fair Energy Prices at http://whi.ch/F4IR3NERGY

Notes to Editors

1.    In July 2014, Which? carried out a mystery shopping exercise that aimed to test energy companies on their ability to accurately explain the Tariff Comparison Rate (TCR). Our callers also asked if the cheapest TCR would be the cheapest tariff for them. We made six calls each to Co-operative Energy, Spark Energy, Green Star Energy, British Gas, First Utility, Npower, Scottish Power, E.ON, EDF Energy, OVO Energy, Good Energy, SSE and Utility Warehouse.

2.   Introduced by Ofgem as part of the Retail Market review (RMR) in April 2014, the Tariff Comparison Rate works like an APR, providing an illustrative cost for an energy tariff based on medium gas / electricity usage (3,200 kWh a year of electricity and 13,500 kWh a year of gas). It combines the unit rate, standing charge and any discounts into one figure and aims to allow consumers to easily compare the price of different tariffs across the market. However, only one in four GB households are medium users for both gas and electricity and if a consumer’s energy usage doesn’t exactly match this TCR figure then there is the potential for people to choose a tariff which isn’t their cheapest option.

3.    Previous Which? analysis revealed that the TCR could mean more than 3.4 million households end up paying up to £55 million more than they need to on their bills.  More detail on this announcement here.

4.    In addition the latest key findings from the Which? Consumer Insight tracker reveal that over the last month:

  •  Energy prices are the top consumer worry, with three-quarters of people (75%) saying they are worried about energy prices;
  • Only a quarter (26%) of people trust gas and electricity companies to act in their best interests;
  • A third (34%) say they are likely to cut back on their spending on energy in the coming months.

The Which? Consumer Insight tracker: An online resource, including the Which? Squeezometer, provides a uniquely detailed picture of today’s consumers. The tracker, updated monthly, has data on consumer spending, attitudes and behaviour, and can be filtered by age, income, gender, region or political affiliation.

Consumer Insight Tracker research methodology: Populus, on behalf of Which?, interviewed 2,081 UK adults online between 15th and 16th October 2014.  Data were weighted to be demographically representative of all UK adults.  Populus is a member of the British Polling Council and abides by its rules.

 

 

 

 

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