Plans to simplify energy tariffs fail to help consumers find the best deal

New Which? research has found Government plans to simplify energy tariffs are still too complex for consumers to identify the cheapest deal.

Just three in ten (28%) got the right answer when asked to identify the cheapest deal from a range of tariffs using Ofgem’s Tariff Comparison Rate (TCR) proposal.  When the tariffs were presented in the style of a petrol forecourt display, using a single unit rate as championed by Which?, the number shot up to eight in ten (84%).

In addition two thirds (65%) of people said they preferred the single unit price model compared to just one in ten (10%) for the TCR.  It also scored highly with consumers in terms of ease of understanding (62%), speed of use (63%) and helpfulness (53%).

The aim of the TCR is to allow consumers to easily compare the price of different tariffs across the market.  However, under the new complex proposals, consumers will only be given an indication of the cheapest deal based on an assumption of medium usage of both gas and electricity.  Therefore all consumers, particularly low and high energy users, will be unable to easily identify the best deal for them.

Worryingly, fewer than one in ten people (4%) who viewed the TCR said that they would check their usage to make sure they’d made the right choice, in addition six in ten (57%) were not even able to find their energy bill.  This means that consumers are more likely to opt for the wrong deal for them.  Which? has previously identified  this could result in more than 3.4 million households collectively paying up to £55 million more than they need to on their bills.

Over half the people surveyed (55%) had never compared their energy tariff with others on the market to check if it was worth switching.  In the last two years only a quarter (24%) had switched energy supplier with seven in ten (70%) saying the main reason to switch is to save money or get a cheaper deal.

Which? executive director, Richard Lloyd, said:

“Energy prices are the biggest worry for consumers but Ofgem’s current proposals will fail to help people find the best deal and could leave millions paying over the odds for their energy.

“You shouldn’t need a maths degree to work out the cheapest energy deal but the complexity of energy pricing makes it virtually impossible for most people to make sense of the market.

“Our research shows overwhelmingly that people find it easier to spot the cheapest deal for them when prices are presented clearly, simply and consistently – just like on the petrol station forecourt. The Prime Minister should intervene again to make sure that his energy reforms work for hard-pressed households.”

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 around eight in ten people (83%) saying they are worried about energy prices;
  • Less than a quarter of people (22%) trust gas and electricity companies to act in their best interest; and
  • Nearly 4 in ten people (37%) say they are likely to cut back on their spending on energy in the coming months.

 

Notes to Editors:

1.    Ipsos MORI, on behalf of Which?, interviewed a representative sample of 2,008 GB adults face to face between 3-19th May 2013. Data were weighted to be demographically representative of all UK adults aged 15+. Respondents on an Economy 7 or similar tariff or without a mains electricity supply were excluded. This gave a total usable sample of 1,681. The two tariffs were tested separately with half the sample each – 882 respondents answered questions on SUP and 872 on TCR, each sample had the same demographic representation.

2.    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.

3.    Consumer Insight Tracker research methodology: Populus, on behalf of Which?, interviewed 2,056 UK adults online between 24th and 27th May 2013.  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.

4.    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.  Please note the tracker will be updated on Tuesday 4th June, which is when this the latest data, will appear.

5.    Which? is asking consumers to come together and support our pledge for simple energy prices. 10,000 people have already pledged their support here.

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