Opinion: Don’t throw savvy customers under the bus

Yes, rate tarts benefit from others’ loyalty, but that’s not their problem.

Energy costs are very much back in the news. That’s partly because of the incredibly cold weather (have you noticed we've had some snow?), which means that we’re all running up enormous bills trying to heat our homes.

But it’s also in the news because the Government is under pressure to introduce its planned energy cap well before the next cold snap, which tradition suggests will fall at some point towards November/December this year.

Energy caps have gone from being something laughed at for being practically socialist before the 2015 general election, when the Labour Party suggested it, to something the Conservatives pledged in their most recent manifesto.

So now the Government is hoping the Domestic Gas and Electricity Bill that has begun its journey through Parliament in the hopes it can be implemented before the end of the year.

Yet the Government’s own watchdog, the regulatory policy committee, has criticised the idea as being “weak and even confused”.

It warned that the plans to cap the energy bills of the estimated 11 million customers on standard tariffs could reduce competition in the market.

As we discussed here, that could mean that the customers who energetically switch around to get the best deal on their gas and electricity could find that they can’t get as good a deal as before.

Now I want better energy deals for more people. Energy poverty is a real and deeply concerning matter, and the knowledge that some people must choose between heating and eating is horrific.

But it’s not okay to make active switchers lose out.

Are rate tarts benefitting at everyone else’s expense?

I firmly believe that the Government must take care to ensure that people who regularly switch do not pay the price for the savings it wants to gain for the many, many customers who never switch.

That would be an outrageous response to those customers who have taken the time to pursue the best deals.

However, this does raise some troubling questions about whether those customers who regularly switch to find the best deals do so at the expense of other customers.

Energy companies want to make a certain amount of profit and if some customers switch to the better deals then it could be argued that those energy providers will be recouping their profit from those customers who just don’t bother.

It’s even been suggested that it’s okay if the market becomes less competitive for the few who do switch, because they are rate tarts who have been making their savings at the expense of everyone else.

That’s outrageous.

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Blunt silver bullet

Not many people switch energy bills in the UK. We’re rubbish at it, frankly.

The number of people switching energy supplier leapt by 30% last year, according to Energy UK, an organisation that represents the suppliers.

Yet even with that 30% leap, switching figures are low. It is a problem.

But the solution to that cannot be one that drives up the costs of those savvy switchers who do move around regularly in order to secure the best prices.

After all, you may as well say that people who seek out the best deals at the supermarket should pay more so that people who don’t can pay less.

Or that people who use vouchers to save money in restaurants and theme parks shouldn’t do so because they are being subsidised by the other diners.

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Deal hunters are often living on a budget and that’s why they spend so much time finding the best price. Or sometimes they are perfectly wealthy but spend time and energy keeping their money in their own pockets rather than their various suppliers.

Reducing the competition in the markets in order to cut the costs for the wider market is not a solution, it’s a false panacea. It suggests that issues of competitiveness and customer costs can be solved with one blunt silver bullet.

I believe that there must be ways to improve the way the energy markets work for customers. However, those ways must be tested to ensure they work for everyone and do not push up the costs of so-called rate tarts.

Right thinking, wrong outcome

The Government is absolutely right to make energy bills a priority. Fuel poverty is a very real thing for many in the UK and, while we’ve all been focused on the mayhem caused by snow, many families will have struggled to afford enough warmth to be safe.

And even those families who aren’t facing energy poverty will have had enough of high bills. Last year, rising energy costs played a key role in the high rate of inflation.

Data from Ofgem shows that the average variable dual fuel tariff is around £1,135 a year, whereas the cheapest available tariffs cost an average of £820.

Energy firms are absolutely entitled to make a profit. This is not an article arguing that they should be renationalised or forced out of business or anything like that.

But customers do need stronger and more robust protections to ensure that they are not left paying over the odds. Perhaps that’s a cap, perhaps it’s greater work to encourage switching, perhaps that’s additional pressure on the energy firms.

We can only hope that the bill being scrutinised by Parliament is shaped into something genuinely useful for consumers.

I certainly have no argument with the Government working to bring down energy bills. But it would be outrageous if price-conscious switchers were thrown under the bus to achieve it.

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What do you think? Will a price cap drive up your bills by reducing competition? How should Government help energy customers pay less? Or should it stay out of it entirely? Have your say using the comments below.