'Energy companies price hikes... they’re just doing their job!' blog discussion

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  • SnowMan
    SnowMan Posts: 3,358 Forumite
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    edited 3 December 2010 at 6:31PM
    What sort of cashback is available from a switch, for example? That has got to come from the energy company, and should give an indication of the sort of money it costs them to acquire a new customer. I don't think £50 is unreasonable.

    If someone keeps switching for no good reason without penalty then the prices will go up for the rest of us. Like I say, it would probably be fairer and more transparent to pay this cost at the start then everyone could benefit from slightly lower bills each month. But I can see that that would discourage many from switching, which would often be a bad thing.

    If the energy company plays fair then I don't see any need to switch again quickly and so the fee becomes irrelevant and I don't have a problem with them charging the people who want to switch just for the fun of it.
    If the energy company are unfair, on the other hand, (e.g. putting prices up unnecessarily, not putting prices down when they should, bad customer services, etc) then I agree they don't deserve any fee for losing a customer.

    I can't imagine people switch for the fun of it, they switch because they can get cheaper energy elsewhere and why shouldn't they if they are on a variable rate. Some others may switch because of porkies told by the doorstep sellers but that is hardly the consumer's fault.

    The only costs that are relevant as backfoot says are the costs of finalising bills and sending out paperwork and terms and conditions etc. I don't claim to have any knowledge at all of what those costs total but I suspect it can't be much.

    I am assuming you would accept that the marketing costs etc that backfoot mention should not be passed onto the consumer through a fixed initial charge. If companies are incurring marketing costs and paying inducements for people to switch hoping that people stay for x months on average in order that the inducements are recouped through the unit rates the company can hardly moan if the average person switches after time less than x. It just indicates their marketing strategy to offer the inducements is wrong. Cashback is just part of those inducements and has nothing to do with switching costs in the previous paragraph.
    I came, I saw, I melted
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    Good point, magyar. I was assuming perfect competition.
    Which there clearly isn't here.

    Which does put a completely different slant on things.
    Anything that makes a market with poor competition _less_ competitive is a bad thing.
    I've come full circle. These charges are a bad thing!
  • backfoot
    backfoot Posts: 2,700 Forumite
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    Nice one Jimmy,

    We are already paying for all these overheads in the unit rate.It is a matter of their choice how much they add or subtract in terms of marketing. We don't want to encourage them to charge it twice by pretending the penalties are separately chargeable switching costs.

    Also remember,that here we are only talking those customer's who are internet savvy and do switch suppliers.There are a huge body of essentially poorer customers who end up paying higher 'standard' rates, because they don't know better or are completely befuddled by the process.

    That's another outcome of this so called 'Competitve Market'. The poor subsidising the rich.
  • oakhouse13 wrote: »
    http://www.bbc.co.uk/news/business-11696903

    Phil Bentley talks about pricing in this edition of The Bottom Line. He talks about switching and the importance he gives to home insulation in helping to reduce expenditure. According to Bentley we have some of the lowest prices in Europe but higher bills than other countries he says because we have such poorly insulated housing stock.

    We really do have some of the cheapest gas prices in Europe http://www.energy.eu

    The price of gas per kWh in the UK is € 0.041

    That's cheaper than EVERY EU country apart from Bulgaria, Estonia, Latvia, Lithuania, Romania.

    You know all those Poles who come here to get better paid work because wages are so bad there, well they have € 0.048 per kWh.

    The French (who certain, erm, "experts" claim protect their consumers from fuel price rises), well they pay € 0.068 per kWh.

    Trouble is we're being typical Brits moaning about our lot and failing to realise how good things actually are here.
    "One thing that is different, and has changed here, is the self-absorption, not just greed. Everybody is in a hurry now and there is a 'the rules don't apply to me' sort of thing." - Bill Bryson
  • backfoot
    backfoot Posts: 2,700 Forumite
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    I think it is not so much the absolute level of our energy prices, but how they change over time.

    I don't think there is enough clarity over the relationship between wholesale prices and retail prices. Ofgem seem to agree with this given their latest look see.

    When prices go up, the companies point immediately to the wholesale price as the driver.Then when the wholesale price drops,they trot out that all their purchases are on forward, backward or sideways contracts,so we are stuck with it.

    A perception maybe, but one which is shared by many many customers.
  • vivatifosi
    vivatifosi Posts: 18,746 Forumite
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    It was mentioned earlier in the thread but I would like to see more done for those who can't switch. I'm on E10. Where I live I can't have gas for technical reasons. All of the switching options are for dual fuel or at least E7, nothing for E10. I have challenged OFGEM about the lack of competition in this area and they did nothing, AIUI the E10 market is currently a duopoly.

    Living in a 3 bed semi with storage heaters switching to E7 isn't an option as the house would be too cold late afternoon and evening (I know this from people with the same house that have switched).
    Please stay safe in the sun and learn the A-E of melanoma: A = asymmetry, B = irregular borders, C= different colours, D= diameter, larger than 6mm, E = evolving, is your mole changing? Most moles are not cancerous, any doubts, please check next time you visit your GP.
  • SnowMan wrote: »
    I can't imagine people switch for the fun of it, they switch because they can get cheaper energy elsewhere and why shouldn't they if they are on a variable rate. Some others may switch because of porkies told by the doorstep sellers but that is hardly the consumer's fault.

    The only costs that are relevant as backfoot says are the costs of finalising bills and sending out paperwork and terms and conditions etc. I don't claim to have any knowledge at all of what those costs total but I suspect it can't be much.

    I am assuming you would accept that the marketing costs etc that backfoot mention should not be passed onto the consumer through a fixed initial charge. If companies are incurring marketing costs and paying inducements for people to switch hoping that people stay for x months on average in order that the inducements are recouped through the unit rates the company can hardly moan if the average person switches after time less than x. It just indicates their marketing strategy to offer the inducements is wrong. Cashback is just part of those inducements and has nothing to do with switching costs in the previous paragraph.

    The only reason I switched recently was for the switching fee. The costs the two companies were charging were close enough to be negligible. I will probably do this once a year from now on unless the deal I am on is better than the closest opponent by more than my share of the switching payout. If they are going to extract the maximum from me, I will play the game too.
    I was apalled recently when switching away from NPower. When the retention department phoned me, I felt that they were excessively pushy - as bad as some of the doorstep sellers I've met. I was offered a tariff that worked out at £43 a month DD on an internet deal. I was paying £78 - reduced the previous month to £68. I have a very small, well insulated property and I am one of those fortunates who doesn't feel the cold too badly and I stay away a fair bit. As I said to him, what would be the point of paying £43 a month and getting into debt with them. He assured me that wouldn't happen. My next query was that if they could offer it that low, why wait till I was switching. I didn't get a sensible answer to that one. I disliked someone trying to make me feel that I was an idiot for switching. They may well have curbed their doorstep techniques but just stuck them on the end of a phone instead.
    I would also like to say that I have also known more ethical doorstep sellers too so I won't tar all with the same brush.
  • davidgmmafan
    davidgmmafan Posts: 1,459 Forumite
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    edited 8 December 2010 at 1:32PM
    I think the problem IS one of perception. Its not difficult to see why rises are high if prices are MUCH lower than other European countries. If it wasn't for North Sea Gas maybe we would've been in the same boat sooner?

    Also when prices rise all people hear is wholesale prices, but there are other issues at work. For example I am relatively certain the push on green energy is only going to make prices go one way. I'm not clever enough to work out if they are viable, but I believe not.

    People have got used to it bein (relatively) cheap, so see it as a huge imposition when the prices make it so that they actually have to consider using less.

    I agree Retentions are an absolute nightmare, other departments hate them as we have to sort out thier mess. There is no other term for it they are, on the whole, a bunch of liars.

    One final point, despite all the ill will towards suppliers, and the problems in the market, I can't help but thinking if the huge numbers of people who have never switched did so (without being conned) this would have to have a downward pressure on prices.
    Mixed Martial Arts is the greatest sport known to mankind and anyone who says it is 'a bar room brawl' has never trained in it and has no idea what they are talking about.
  • airmark
    airmark Posts: 17 Forumite
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    An overlooked factor that explains BOTH why energy prices in the UK have risen more in recent years than in the rest of Europe and AND why they are still cheaper than most countries is the exchange rate. The pound has declined considerably against most major currencies which makes energy imports more expensive in pound terms even though they may be cheaper in euro or Swiss franc terms.

    As the current monetary policy pursued by the BOE is almost directly leading to consistent pound weakness (and hence imported inflation, even against the Bank's official mandate), this is an expected direct consequence. For homeowners with mortgages the benefits in both maintaining the house values at high levels and keeping mortgage payments low FAR OUTWEIGH the costs in energy bills. Those renting their home are left to pick up the tab (for the time being).
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