There has been a lot of change in the domestic energy market recently, but I have to say I find myself asking, “For whose best interest have these changes been made?”
The UK’s domestic energy market is competitive, there is a wide variety of choice and prices available, there are multiple options for preference in payment methods and there are suppliers to suit all tastes. If it was a true competitive market, driven by normal market forces, then I am not sure the following scenarios, which seem to have very little regard for consumers, would be occurring…
Of primary concern, the recent implementation of the Competition and Market Authority’s (CMA) remedies (specifically the prepayment price cap) may have had some possibly unforeseen, and unintentional consequences.
The purpose (to my understanding) of introducing the prepayment price cap has been to protect vulnerable, lower income and fuel poor consumers, effectively removing the historically punitive rates applied to PPM tariffs (typically PPM tariffs have been up to 35% greater than credit tariffs). This in part implies that vulnerable and lower income consumers only use prepayment as a payment method and that PPM customers are therefore all vulnerable and on lower incomes, this cannot be the case and large numbers of consumers are also and have always also used credit meters. It should follow, then that as a result of the price cap parity between prepayment and credit tariffs can now be achieved.
The recent glut of price increases, announced first by the ‘big six’ and followed up by smaller independent suppliers have revealed what I would consider to be disturbing and cynical pricing activity. Rather than achieving parity it appears that the majority of suppliers have chosen to disproportionately increase credit SVT’s. For the first time in at least 5 years (and I suspect longer) it is now cheaper to pay for gas and electricity using prepayment for standard variable tariffs. Whilst this appears to be a positive step for PPM consumers we know that they only represent 16% of the domestic energy market. The CMA’s own findings in 2016 indicated that 65% of consumers use, or have defaulted onto SVT’s. It is therefore clear that a more significant number of vulnerable and low income consumers have now been detrimentally effected as a result of the implementation of the cap. I think fault here lies not with the mechanism of price capping PPM tariffs, but rather with suppliers pricing structure for credit customers. It appears that either no effort has been made to assess the impact on vulnerable, low income and fuel poor consumers, or that complete disregard has been shown to those customers plight.
In addition to these concerns I would also like to draw attention to the impact of SSE’s recent and significant price increase for SVT’s (14.9% effective April 2017). These increases cause concern and detriment for a significant portion of RSL’s tenants across England, Scotland and Wales. SSE’s void management services are utilised by a large number of landlords responsible for stocks of hundreds of thousands of homes. SSE use their relationship with these landlords to switch supply of properties to their SVT’s in return for energy credit. Whilst this relationship is beneficial to the supplier (cheap acquisition of new customers) and the landlord this is at the disadvantage of often fuel poor tenants, negatively affecting their ability to maintain a sustainable tenancy
British Gas currently service around two million homes in similar relationships with nearly 140 landlords and whilst they have not currently increased their SVT rates, they have announced they will do so in August 2017 ahead of the Autumn, falling temperatures and increasing energy usage. Although the impact of this is yet to be seen, the disproportionately high number of vulnerable, low income and fuel poor consumers that make up the social housing population are likely to be burdened with similarly high fuel costs.
Our objective has always been to ensure that properties are switched to ‘cheaper than the big six’ tariffs, we also guarantee direct fuel savings through energy credit and reduced workload for the landlord. Most importantly though and in contrast to all our competition we offer an Ofgem accredited switching service which can be accessed in a number of ways to suit all staff and tenants should they wish to reduce their energy costs further.
Going back to my original question, “Who is actually focused on the customer?” if suppliers are focused on acquisition, profit and regulation, and many landlords only on efficiencies and organisational savings. Is it only us and the housing providers using our services then who are focused on positive outcomes for all?