Energy firms hiding cheapest deals while profits peak

As energy firms' profits peak, an investigation reveals that suppliers are not always offering the cheapest deals to customers wishing to switch. Fortunately, the government has held an emergency summit to stop the problem. But will it really help consumers? Robert Powell finds out...

It’s been a stressful few days for Britain’s energy firms.

Consumer groups, regulators and politicians have all turned the heat up on the ‘big six’ group of utility suppliers, aiming accusations, suggestions and straight threats at the companies.

But will they really make any difference to stretched households currently suffering the financial thump of record high bills?

Hiding cheapest deals

The stressful week for energy firms started on Thursday after Which? published the findings of its customer service investigation. The consumer group found that energy firms were not always offering the best deals to customers wishing to switch suppliers. Telesales staff also gave inaccurate information to consumers in some cases.

Which? researchers phoned up each of the six main energy companies 12 times in one week and asked them for their cheapest tariff.

Scottish Power telesales staff offered the cheapest tariff in 11 out of 12 of the calls. However the firm’s operators only told researchers about the relevant exit fees attached to the tariff in three of the calls.

Staff from Npower and E.ON offered their cheapest deal in 10 of the 12 calls and explained any relevant exit fees in 10 and nine calls respectively. British Gas also divulged their cheapest tariff in 10 of the 12 calls, but only told researchers about exit fees in seven of the enquiries.

Southern Electric (part of Scottish and Southern Energy) and EDF emerged as the worst suppliers.  EDF only offered their cheapest tariff in three of the twelve calls, while Southern Electric told Which? about their best deal in five of the 12 calls.

EDF said that their cheapest deals were only available online, while Southern Electric defended itself by pointing to the small price difference between tariffs.

Simple tariffs

In response to the Which? report, Ofgem highlighted the problem of large number of complex tariffs and pointed to their ‘simplification plan’ also released last week.

Over 400 different tariffs are currently available across the energy market. Many of these are bundled up with confusing discounts and cashback offers that vary according to payment type. Ofgem is proposing to standardise energy rates and move towards a simple unit price that will enable consumers to compare tariffs more easily.

The propositions are just one of four waves of reforms planned by the regulator. Next month Ofgem will announce more detailed reforms to the energy sector, followed in December by propositions to break the industry ‘stranglehold’ currently exerted by the big six companies. The New Year will then see the regulator publish findings of an independent report focused on making energy company accounts more transparent.

However the simplification plan wasn’t the only report released by Ofgem last week.

Profits peaking

The regulator also essentially accused the big six energy companies of profiteering after it published figures detailing their per-customer takings following recent price hikes. Ofgem said that suppliers had increased the profit made from each dual-fuel customer by a massive 733%; from £15 to £125.

Unsurprisingly energy companies immediately hit back at the regulator, criticising its methodology. British Gas stated that Ofgem’s survey excluded the discounts it offered customers through fixed tariffs. The supplier estimated that it had in fact made £24 profit per dual-fuel customer after tax.

Emergency energy summit

If a barrage of criticism from consumer groups and regulators last week wasn’t enough, energy chiefs woke up on Monday to tough(ish...) words from Prime Minister David Cameron and Energy Secretary Chris Huhne.

Writing on MoneySavingExpert.com, the politicians said that they could not control volatile international energy markets but could still help people get their bills down by ensuring they were on the cheapest possible tariffs.The pledge came as the six biggest firms met consumer groups, politicians and the regulator Ofgem for an emergency summit.

However if initial reports from the meeting are to be believed, any immediate respite from high energy rates looks very unlikely. The key message coming from the government seems to be that consumers must insulate their homes and keep looking for the cheapest tariffs and switching accordingly.

Hardly a new revelation.

Energy Secretary Chris Huhne also told the BBC that energy companies “are not the Salvation Army” and hence expected to earn a reasonable return.

Couple these comments with recent rumblings from British Gas concerning the rising price of wholesale energy on the international markets and it becomes hard to imagine utility rates heading anywhere but up anytime soon.

Indeed, it seems that not even the government can (or even really wants to) get a handle on Britain’s energy companies. Let’s hope that Ofgem’s detailed report next month has a bit more bite than the somewhat powerless message that emerged from this week’s summit.

Get the cheapest deals

But nevertheless, it is still always important to ensure you are on the cheapest tariff. And currently some of the best deals available are for those who are prepared to fix their rate. So here are the best fixed tariffs around at the moment:

Source: energyhelpline.com – all tariffs are available from the lovemoney.com energy comparison centre.

Just warm words?

Labour responded to David Cameron and Chris Huhne’s energy pledge by insisting that their ‘warm words wouldn’t heat homes during the winter’.

Are they right? Or do these latest moves by the government and Ofgem really represent a new tough approach to energy companies?

Have your say using the comment box below.

*Average usage as defined by OFGEM is 16,500 kWh pa of gas and 3,000 kWh pa of electricity. Actual charges will vary by region and consumption.

** Against a typical bill of £1,300 after this round of price rises. Figures based on average usage as set by Ofgem for a dual fuel bill paid by monthly direct debit.

More: Find out if you're on the best tariff using lovemoney.com energy switching centre | Pay nothing for your energy for two months! | The record breaking energy tariff