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CMA to Uncover the Cost of not Switching Energy Supplier

CMA logoFor all too long the energy industry has known a secret that they didn’t want anyone else to know, least of all their captive customers.

The secret was so effective that it actually became the perfect (invisible) marketing tool:

By allowing the public and media to believe that “all energy suppliers are the same” you create a perfect recipe for apathy.

And apathy breeds stasis.

It is exactly that status quo of ‘captive’ customers that has enabled the energy suppliers, particularly the Big 6, to optimise the margin made on ‘incumbent’ customers.

Happily, the worst excesses amongst the Big 6 energy suppliers in the business market was brought to an end in 2014. That followed the ‘banning’ of rollover contracts amongst the Big 6 prompted by campaigning by our own CEO James Constant and the establishment of the Number 10 Downing Street SME Energy Working Group.

Now under the Competition and Markets Authority (CMA) investigation into the energy market the Big 6, British Gas Business, EDF Energy, SSE, Scottish Power, E.ON and nPower will be required to reveal the amount of profit they make from customers who have failed to exercise their right to switch supplier.

The findings are already being eagerly anticipated with expectation that the Big 6 make far more profit from their long term customers that those who have switched supplier.

Whilst Ofgem through their monthly Supply Market Indicator (SMI) report estimate the level of aggregate profit made by the Big 6 per customer – £105 according to November’s report – there has understandably been general reluctance to expose the actual figures by the suppliers.

Whilst the Big 6 are the subject of most commentators ire, the smaller, new entrant and independent suppliers have also operated, and in many cases still do, the dreaded rollover contract. In such circumstances, unwitting and unprepared customers are forced into a premium priced fixed term 12-month contract at the end of their existing agreement by virtue of not taking proactive action to secure an alternative deal.

Edmund Reid, Utilities Analyst at Lazarus, a research company, said:

“Certain customers are significantly more profitable than others and may open the companies to allegations that their ‘loyal’ customers are receiving poorer value for money than those who shop around”

Defending their policy, amongst others, of limiting the ‘deals’ on offer to customers, nPower claimed:

“Energy suppliers can offer competitive fixed-term tariffs as a means to engage customers, existing and new. These offers are only available for a fixed time”

Whilst the CMA investigation is long overdue, it is clear that businesses should not be awaiting the outcome for acting on their energy contracts, indeed nearly 80% of business electricity customers are still being supplied by the Big 6 many of whom have never switched.

Apathy is a recipe for being taken advantage of in all walks of life. Someone tell Russell Brand.