The sly energy tariff trap

Can the minnows compete? We look at which suppliers top the tables and whether this might be just a little deceptive.

The big six gas and electricity suppliers hold more than 99% of customer accounts compared with the smaller ones. I'm taking a look today at why that might be, and if customers are making the right decision by sticking with the majors.

Who tops the best-buy tables?

As you'll see in my table below, the cheapest tariff for a medium-energy user in the GU14 6xx post code area is an EDF one costing £950.

If you're wondering why this can possibly be lower than £1,000 after years and years of price rises, firstly bear in mind that some areas are more expensive than others.

Secondly, there's some deviousness going on. The industry convinced OFGEM to mark down what it calls “medium usage” from the beginning of this year on the basis that medium users don't use as much energy as OFGEM used to claim. So, on the old measure of medium usage, the cheapest tariff today costs £120 more at £1,070, although it's the same EDF tariff that takes the top spot:

Cheapest tariff of each supplier

(In the GU14 6xx post code area, based on medium users)

Sharp-eyed readers will notice there are nine counts of big supplier in my table, not six. That's because Atlantic and Southern Electric are both brands of Scottish and Southern Energy. The same company also supplies the power and tariffs for M&S Money, and npower does the same for the National Trust. If a supplier is missing from this table, it's because they do not sell in the post code area I used in this example.

As usual, there is a cluster of big six tariffs at the top of the table, making them the cheapest for new customers.

But the cost story doesn't end there

If you've had your cup of tea this morning, you may be alert enough to be wary about that phrase “cheapest for new customers”. Well done.

If you look at the top three tariffs, they are all “versioned” tariffs. This means that the supplier has released a tariff, but then removed it from sale and replaced it with a new version of the same tariff for new customers only. Old customers remain on the removed tariff. This allows the supplier to charge different rates to its newest customers as to its aging ones.

There is only one plausible reason for versioning tariffs and it's not good news for customers.

By releasing a new table-topping tariff, let's call it Mug tariff (as in “you are a ...” or even “you've been ...ged”), a supplier easily encourages more customers to switch to its latest, cheapest rates. When the supplier reaches its customer targets for the tariff, it then releases a new version, Mug tariff v2, which is also table-topping. The supplier removes version one from sale.

All customers from version one can now have their tariff rates increased without it affecting the supplier's position in the comparison tables. This can be done either simply by upping the rates, or by moving customers to other tariffs. The latter tactic is particularly sly, because suppliers can increase your rates without being forced to make a big public announcement about price increases.

Interestingly, the top three tariffs – all versioned – are big six tariffs. Indeed, the only versioned tariff in my table that is not operated by the big six is from first:utility.

Since mid-February, EDF has released four versions of its Online S@ver tariff, British Gas has released two versions of Websaver, E.ON has released three versions of SaveOnline, and npower has released two versions of SaveOnline. first:utility has released just one new version.

This is just one way that suppliers can manipulate customers. You can read about others in Energy suppliers manipulating customers and 5 gas and electricity rip-offs.

If you're a cautious switcher who doesn't like being manipulated, you might like to either choose the cheapest non-versioned tariff, or the cheapest fix in your area – if the price is right. Bear in mind that the price can still rise if a tariff is non-versioned; it's just that it'll be more transparent and you're perhaps less likely to be taken for a ride.

Other factors to consider

By far the factor that most customers care about is cost, but some like to look at other things.

You'll see that many sites, including lovemoney.com, produce service ratings between the suppliers in the comparison results. I prefer to ignore service ratings, because they're all relative: since most suppliers seem to have pretty bad customer service, that doesn't mean a great deal to me when you tell me one supplier has the best customer ratings.

However, one small supplier that seems to get consistently good impartial feedback is OVO. Ebico also does well, but I've heard little from customers for a long while, possibly because Ebico's prices have been uncompetitive in most areas for some time. Everyone has their price, even those who like better service and treatment.

You can also look for the special features. This might be free energy meters or reward points. However, make sure you're not paying too high a premium for any gimmicks.

More: Compare gas and electricity prices in your area through lovemoney.com | Energy suppliers manipulating customers | OFGEM proposals unlikely to do much good