Saturday, February 28, 2015

Energy suppliers and the price comparison websites take us for fools.

There are two frauds going with Energy supply. The first is the basic premise that one supplier over time will be cheaper than another. There is no reason why this should be true, and it isn't. The fundamentals of Gas and Electricity supply are the same for all the suppliers. The raw materials cost of gas/electricity, the cost of distributing it  to the home and the costs of marketing do not vary much between suppliers. The need to invest and to pay shareholders dividends are much the same as well. No one supplier has a cost advantage that they can convert to a permanent price advantage. What they do is continuously run tactical price-led campaigns to try and encourage switching. In the very short term a consumer can save, but over time swings and roundabouts cut in and there is little point.

The second fraud is the price comparison websites. They serve the needs of the suppliers to induce switching and are rewarded with commission payments when they succeed. The implication that you can save (say) £210 a year by switching from one supplier to another is highly specious (read the small print if you doubt it!). What they do is gross up the tactical offer from Supplier A and compare it with your current price from supplier B. But in a few weeks time Supplier B could have a similar tactical offer...or Supplier C or Supplier D for that matter. 

So what should the consumer do, stick with one supplier and engage with them. Make sure that you let them know you are monitoring prices and that you expect them to be competing over time. And that you expect the best tariffs. There is little point in continually switching supplier. You only feather the nest of the price comparison websites as well as spending time "researching" when you've got better things to do ! 


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