The Centre for Competition Policy at the UEA has found that half of the population have never switched gas/electricity suppliers, and are paying more than they need to accordingly. Further, even some that have switched have done so for the wrong reasons so that they, too, are paying over the odds. Their report is here. And we've had full consumer choice in gas and electricity for ten years now, one of the great achievements of John Major's much-maligned government.
On the plus side of this sorry but somehow inevitable story is the well-known economic phenomenon that you only need competition at the margins for at least some benefits to be felt across the market as a whole. In this case, we can be fairly sure that prices for even the inert 50% are somewhat lower than they would have been without the competitive market framework.
On the negative side, we can be equally confident that those who can least afford to pay over the odds will feature disproportionately amongst this 50%.
As ever, the Bible articulates the chilling truth:
To them that hath, shall be given. And from them that hath not, even that which they have shall be taken away.
Flump
ReplyDeleteHave to do better than that ...
ReplyDeleteI see. Better ,you are sggesting, to be born wealthy then ...hmmm good point
ReplyDeleteYes Mr M, I am aligning myself squarely with St Matthew's Gospel on this one
ReplyDeleteI've had a few jobs selling gas and electric. Generally speaking it is older customers who are less likely to switch.
ReplyDeleteAs for older people being generally poorer, I'm not sure this is so. Most have miniscule or no mortgage commitments for a start, they tend to use less petrol, spend less on clothing and other fashion accessories.
There is also a distinct lack of imagination in the sales and marketing methods that are employed. As time goes on, more consumers discover websites such as uswitch, have bad experiences switching or get settled with a supplier they trust and it gets harder and harder to get them over.
Knocking doors in those first few months after deregulation would have been a goldmine. Market rates are usually up to £50 a duel fuel contract.
Steven - I always find first-hand empirical input like your to be of huge value in understanding the underlying data.
ReplyDeleteMy only sources on this are FPAG and energywatch. FPAG estimates lower-income data by noting that these energy users tend to be on pre-payment meters: they say that only 35% of prepayment users are
likely to switch supplier compared with an average 50% across all users.
energywatch estimates that only 39% have never switched. "Typically, this group understands that they could probably make some savings by doing so, but feel that the potential savings would not outweigh the time invested in the switching process"
Then you have patriotism - when I worked for British Gas we had to tell Scottish customers we were calling from Scottish Gas.
ReplyDeleteIf you got it wrong they'd invariably say 'Och, am wee Scorrtish Gas, ah dinni wan ney Breetish Gas'
Calling drunk Glasweigans whilst hungover on a Saturday morning was nearly as bad as directory enquiries.
The Welsh prefer their regional suppliers for the same reason.
The funniest 'patriotism' story has to be the attempt by EDF Energy to prevent Centrica (sorry - British Gas) pointing out what the 'F' stands for.
ReplyDeleteSeveral of the suppliers kept on the original, regional brands they had bought - EDF did for several years until 2006 - but only SSE does this now. Do you reckon there is still money to be made by sticking with the old branding?
There's definately customers to be had like this in the regions concerned. Moreso in patriotic places like Wales. As they all market themselves far and wide whether it's better overall is more complicated I would say.
ReplyDeleteThen again old people will switch if you tell them it's specifically for old people (i.e. SAGA, Staywarm).
ReplyDeleteThe most successful sales campaign I ever took part in was selling NPower to the Everton database. We got something like 10% of them over. As soon as you say 'I'm calling on behalf of Everton FC' you've got their attention. The fact Everton were getting a kickback helped immensely.
There might be a wider lesson for politicians there!
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