Why Switch?
It is a well-known fact: If you have stuck with your old energy supplier for years, it is certain to have landed you on a very expensive deal. The pesky Standard Variable Tariffs offered by the Big Six are just about the worst deal you can get for your gas and electricity. Which is why the Government is now cracking down on these tariffs and have implemented a price cap.
Most of us have also heard the advice from a commentator, suggesting that we switch supplier and compare tariffs between different companies regularly. We are told to go on switching sites to get a better deal.
However, did you know that while switching sites claim to be free for the consumer, in reality, you end up paying? This is just another, more subtle way of ripping you off. The large energy suppliers have been ripping you off for years. We are meant to be moving away from that and experience greater fairness in the energy market, through increased competition. But as it happens, the very mechanisms that are there to help you gain choices have inbuilt within them a lack of fairness.
Fairness
In what way are they unfair? First of all, switching sites are also companies with shareholders who want their dividends. To make money, the comparison sites take commission from suppliers (be it energy, insurance, or lenders). On the face of it, their services are free to the consumer, but the commission they charge will have to be paid by someone. Who? You, of course – the consumer, who else? In essence, we all pay for the commissions through increased energy prices. It appears that energy switching sites charge an average of £30 per fuel per customer (i.e. £60 if you are signing up for both gas and electricity). That extra cost has to go somewhere – it ultimately will end up on your bill.
Most energy suppliers offer a series of tariffs, luring people in on deals initially. Unless you are alert, you are likely to roll onto a more expensive tariff after a while. For the savviest of us, frequent switching saves us from this. But by using comparison sites regularly to get the best deals, we ensure that those very sites get regular commissions from us, that way contributing to increased costs and therefore ultimately the tariffs. The end result? Artificially high prices. The victims? Us, the people.
Secondly, the comparison sites are not unbiased, despite what we are led to believe. A lot of the switching sites will only list companies who pay them a commission. Some will also list the rest, but only if the consumer ticks an obscure box, asking for all suppliers to be listed. If choosing a non-paying supplier, the consumer has to work harder to find them and make the switch. In addition, there are examples of switching sites featuring paying sites much more favourably in their descriptions and also more prominently, in a similar way paid ads to feature prominently at the top of google search pages.
Who Wins?
How does this system of commission based switching sites give the consumer a fair, unbiased read of the market? How does it help them get the best possible deal? The consumer is still left with a confused market in front of them and no (or very few) tools that give them an objective overview[1].
New companies have sprung up that make the switches on behalf of the consumer on a regular basis, in order to ensure people are always on the best deal. However, while these companies may make your life simpler, they too need fees for themselves and often use switching sites to find the best deals for the consumers, adding a significant extra level of cost to your bills. It may be easier – but fair, unbiased and the best deal? Not necessarily…
As Claer Barrett, editor of FT Money has said, ‘the problem with switching is that you have to keep doing it to avoid being gouged on price. Wouldn’t it be better for consumers if energy companies, banks and insurers rewarded our loyalty instead?’[2]. How should a company be set up, to ensure that the price is always fair, tariffs transparent, and loyalty rewarded rather than penalised? That is precisely what we asked ourselves before setting up People’s Energy. Perhaps it is time to consider a deal that guarantees you the best deal at all times, as you get the profits yourself, rather than the supplier or switching sites shareholders? A deal that means you never have to switch again?
[1] There are a few, less known exceptions. For example, Green Electricity Marketplace doesn’t accept commission fee from suppliers, in order to demonstrate the independence of their tariff ratings.
[2] Financial Times, September 29, 2017: Price comparison websites are far from epic https://www.ft.com/content/26cbde38-a38d-11e7-b797-b61809486fe2
Whilst I found this article really interesting, and take your point about switching sites taking commission and therefore ultimately costing consumers more, I think you should be cautious about being overly critical of them as they are an important tool to help you achieve a speedy growth in customer numbers.
I am a potential switcher, and had never heard of People’s Energy before you were returned as the cheapest option for me via a number of switching sites (yes, after I’d been savvy and ticked the obscure box!)
Hi Clare,
Thank you for your comment and taking the time to read our blog – it really means a lot to us to have an engaged audience who share their opinions with us.
We completely agree that switching sites have a valuable place in the energy market and that it is a great tool for people to find out about newer energy companies like ourselves. Our main point of concern is that not all tariffs and companies are featured as there is often a pay to be featured system. This goes against our ethos of having a level playing field and providing people with fair & transparent choices for their energy supply. It’s something we’re hoping will change as more people realise they may not be getting the best deal possible at first glance.
We love your savvy eye and we’d love to welcome you to the People’s Energy family one day :).
In the meantime do feel free to get in touch with any further comments at marketing@peoplesenergy.co.uk.
Many thanks,
Sophie
Hi, I first heard about this company on the old “Wright Stuff” Their simple idea was joining “capitalism” with “socialism” . Given my age (53) I have seen the tories (conservatives) and labour battle over the years:) I have seen capitalism sort the country out, and then I have seen Labour spend the money to good affect. So, in affect, I agree with the idea of socialism, but I know capitalism works:) Balance, and this company brings that!
It has more than halved my Energy Bill:)
A simple Idea that has my 100% backing:)
Andy.
Thanks for being a People’s Energy supporter, Andy. Don’t forget to spread the word!
Interesting article – ideally transparency is the key here. People’s Energy is very open about its business model which is very refreshing. If the switching sites were obligued to state how much in commission they were being paid by the relevant energy supplier people would have all the information to make an informed decision. Perhaps the regulator could help here if they aim to promote a fair market.
I changed from npower to Outfox the Market in early September 2018, Outfox then had two price increases and began seasonal variation of Direct Debit payments. So within two months I’ve changed again to People’s Energy. Within 24 hours an email came through, but no idea of when we actually change. Outfox have already told me they will charge £25 for stopping the DD even though I’m £162 in credit! Yesterday I also changed my parents to PE.
Hey Mark,
It sounds like you’ve been having a frustrating couple of months. Hopefully, you won’t have to worry about switching ever again! If you have any questions regarding your switch, you can always contact our membership support team on 0131 285 5510 or email customerservices@peoplesenergy.co.uk. Thank you (& your parents) for joining us! 🙂
Interesting read though I did find Peoples Energy via an energy comparison site (money market). Deals that seem too good to be true have me nervous.
Let me explain.
Over a year ago I signed up to the “Big Switch” with my local council, they took everyone that signed up and held an auction to find an energy supplier with the cheapest tariff (the bonus for the supplier being a huge influx of customers) SSE won
I switched and all was going well, they even gave me a snazzy smart meter so I could see exactly how much I was spending (man the paranoia that thing induces lol, I mean knowing monthly is one thing, seeing daily is scary).
Then the last couple of days ago I noticed I was using way more than I should of been. Today I called them to report the issue and while looking through their site I saw that my tariff was standard not fixed.
Both my standing fees had gone up drastically, my gas unit price had doubled and my electric unit price was up by about 75%.
They told me they emailed me about it…found the email in my spam filter, they wrote a letter to me to tell me my smart meter was changing to 30 minute bursts and what they do with that data but something as important as a massive price hike they emailed…. damn shady
So now I am signed up to Peoples Energy, I dont like that the first payment will be upfront, next month is gonna be a tough month for me now. I really dont like that it takes 21 days. But atleast I will be paying a lot less then SSE (who I would not call con artists for legal reasons and who clearly didnt do anything untoward with the emails……. i mean the bill emails all made it to my inbox after all…..just saying..)
Hi Dave,
People’s Energy does not currently have full support for existing snazzy smart meters, unfortunately. We should have this functionality implemented soon, with the expected timescale being within the next few months.
We’re sorry to hear of your past experience and hope this does not repeat itself. However, to reassure you, any changes to your direct debit date, amount or frequency, you will be made aware via GoCardless who is our third-party payment partner. In terms of changes to your actual tariff price, if this were to increase and subsequently affect your direct debit amount by £5 or more, we would contact you via email – or letter if you are a Paper Billing customer – with 30 days’ notice to advise you of the change before it is implemented.
To avoid missing our important updates, we would suggest adding ourselves and GoCardless to your “safe senders” list because most of our account-related correspondence will be via email. Instructions on how to do this will vary depending on the email service provider you use but our Membership Support Team would gladly assist should you have any difficulty with this. And of course, we promise not to ever send you spam emails – we aren’t particularly fond of those either!
You should always be able to access and download your bills via our online portal once the first billing month has passed i.e. once we have been supplying you for at least one month. Our online portal also gives visibility over your “live balance” with us so that, any time you enter a reading, you can see exactly what your balance is with People’s Energy. So in short: no more nasty bill surprises!
Hope this helps!