MSE's Cheap Energy Club: Discuss & feedback

Financial_Saddler

ic451uk wrote: »

I'm sorry this is going to be a long [STRIKE]rant[/STRIKE] post

What a ridiculous approach. This effectively assumes that, once my fixed price deal ends, I will do nothing and drift into my provider’s exorbitant undiscounted variable rate tariff. This exaggerates the cost of my current supplier and may have persuaded me to switch if I hadn’t checked the calculation. Using this method, it will always appear to be worthwhile to pay a cancellation charge to switch to a new fixed rate deal as the expiry of the current deal approaches, when this is not actually true.

To take a simple example:
Mr. A has a 12-month fixed rate, fixed term electricity contract with ABC Ltd. He’s paying £480 per year (£40/month), and there is a cancellation charge of £30. ABC’s Standard Variable Tariff costs 20% more than its fixed rate, fixed term deals. Here is what the Cheap Energy Club will show is the annual cost of this tariff at the start of each month:
Month 1: 12x£40=£480
Month 2: 11x£40+1x£48=£488
Month 3: 10x£40+2x£48=£496
Month 4: 9x£40+3x£48=£504
Month 5: 8x£40+4x£48=£512
Month 6: 7x£40+5x£48=£520
Month 7: 6x£40+6x£48=£528
Month 8: 5x£40+7x£48=£536
Month 9: 4x£40+8x£48=£544
Month 10: 3x£40+9x£48=£552
Month 11: 2x£40+10x£48=£560
Month 12: 1x£40+11x£48=£568
Last Day of Contract: 12x£48=£576
Now let us say that XYZ Ltd has a tariff that is 10% more expensive than ABC Ltd. This will come up on Mr. A’s results as costing £528/year. Therefore, from Month 6 onwards, the CEC website will mislead Mr. A into wanting to escape from his deal with ABC and switch to XYZ – only the cancellation charge stops him. Towards the end of month 10, the savings exceed that cancellation charge and he switches. Once he puts his new details into the Cheap Energy Club website, it immediately tells him that he could save money by switching from XYZ back to ABC! The correct action was actually to do nothing!

May I therefore suggest that the tool be adapted to include an optional alternate calculation method in these sorts of cases? This calculation period should be until the end of the fixed rate deal that the customer is currently on (this may need to be a choice of either date in the event of having two separate fixed terms for gas and electricity). This will avoid giving a new deal this apparent but unreal advantage. Presumably making this available as an 'option' (to be selected by the user once they've seen the dog's breakfast OFGEM demands) would avoid upsetting the lame dog of a regulator?

And breathe... Thanks for reading through all this - I would have sent it to [EMAIL="energyclub@moneysavingexpert.com"]energyclub@moneysavingexpert.com[/EMAIL], but SpamCop has a downer on Talk Talk email addresses at the moment.

IC

You are completely correct - this methodology means that people will be given totally misleading data which could actually result in them being out of pocket through making a switch.

I actually received a "switch alert" yesterday. I thought that the "savings" looked too good to be true, so did the calculations myself.
I have 9 months left on a fixed tariff, so the calculation had used the assumption of a further 3 months standard tariff to realise the magic savings figure. Taking the 9 months on its own, I would be out of pocket to the tune of around £60 if I had sleepwalked into the recommended switch.
So a very useful service actually becomes of less use as you countdown towards the end of an existing tariff.

k18dan

How about switching from one tariff to another within the same company?

I would be going from Npower Price Fix March 2016 to Npower Fixed Energy Online April 2016

Would I still get the £30 switch incentive?

zacchaeus_2

MSE_Dan_L wrote: »

Following changes introduced by Ofgem, the energy regulator, calculations on comparison sites have to factor in the tariff costs for the remainder of the fixed tariff, as well as the standard tariff the energy suppliers moves customers onto when the fixed tariff ends. This means if you have two months of your fixed rate tariff remaining, your calculation is based on two months atthe fixed tariff rate, and then ten months at the standard tariff rate.


We don’t think this is particularly easy to understand so we're working on showing your fixed cost and go to costs separately, as we think its clearer this way.

This is a disappointing example of well-meaning but backfiring regulation completely neutering the value of what could be an outstanding service. I can completely understand why the regulators would want to ensure that a comparison site's quote for a new tariff wasn't misleadingly low, but why they'd want to create a system that inflated the existing tariff cost (misleadingly, in this case) is hard to fathom. Surely, if a comparison site were engaging in slim practices, overstating the customer's existing costs would be exactly the sort of thing they'd try to do!

Anyway, a couple of suggestions for ways round this. No doubt you've thought of them already, but just in case...

If I've understood correctly, the site currently shows (as the regs require) current monthly cost based on an average of the cost under the remaining fixed period plus the cost under the standard tariff.

Would it be possible to add a couple of sentences in the "How your costs and savings worked out" box along the lines of the following?

Your current tariff will cost £X per month until it ends so, if the estimated monthly costs for the results below are more than £X, you may wish to consider waiting until nearer the end of your current tariff before switching to another one.

Presumably, as long as the average cost figure is still there, the regs would still be satisfied, but this extra information would make the potential pitfall a lot easier to avoid.

A second suggestion is that, although the regulations require you to present the current cost based on this misleading average, the system is also sending out email alerts that are based on this same calculation. Could you suppress the emails until there's actually a tariff that will cost less than the user's current monthly cost?

1666hby

I've just switched from Sainsbury's Energy dual fuel to Ovo. Resulting in an email from British Gas promising never to misuse my personal details. !!!!!!, MSE Cheap Energy Club?

frank777

k18dan wrote: »

How about switching from one tariff to another within the same company?

I would be going from Npower Price Fix March 2016 to Npower Fixed Energy Online April 2016

Would I still get the £30 switch incentive?

Hope it's not too late, checkout Quidco was £60 last week now £55 cashback within the same company - NPower - check the terms and conditions

LesD

zacchaeus wrote: »

This is a disappointing example of well-meaning but backfiring regulation completely neutering the value of what could be an outstanding service. I can completely understand why the regulators would want to ensure that a comparison site's quote for a new tariff wasn't misleadingly low, but why they'd want to create a system that inflated the existing tariff cost (misleadingly, in this case) is hard to fathom. Surely, if a comparison site were engaging in slim practices, overstating the customer's existing costs would be exactly the sort of thing they'd try to do!

Anyway, a couple of suggestions for ways round this. No doubt you've thought of them already, but just in case...

If I've understood correctly, the site currently shows (as the regs require) current monthly cost based on an average of the cost under the remaining fixed period plus the cost under the standard tariff.

Would it be possible to add a couple of sentences in the "How your costs and savings worked out" box along the lines of the following?

Presumably, as long as the average cost figure is still there, the regs would still be satisfied, but this extra information would make the potential pitfall a lot easier to avoid.

A second suggestion is that, although the regulations require you to present the current cost based on this misleading average, the system is also sending out email alerts that are based on this same calculation. Could you suppress the emails until there's actually a tariff that will cost less than the user's current monthly cost?

I wouldn't hold your breath on any changes to the system. This issue has been ongoing as long as the 'Energy Club' has existed. They are quite happy to show costs this way as it encourages the 'unsavvy' to switch and make them money through referral fees. It has always been disappointing in that MSE was set-up to benefit folks who are not as savvy as need be. But here it is doing the complete opposite.

All the replies we get just blame it all on Ofgem. If the system is not fit for purpose, it should be withdrawn altogether.

scrounger12

It may be me, but I used cheap energy club and it boasts a saving of £150.00 a year. WOW! Great news. But when i looked at the monthly payment it was only £72.00 cheaper less my £ 60.00 exit fee's so £12.00 is hardly worth it. Wonder how many have switched and ended up more or less the same. I use comparison sites all the time soIi know when it's worth switching. Be careful, things are usually too good to be true.

HeatherKM

I tried to swap deals but couldn't find my tariff...I'm with Ovo on Cheaper energy fixed deal which ends in April this year but none of the selection of tariffs available matched my unit rates and standing charges??

trollheimen55

I'm dithering not sure what to do. We are with M and S Energy Capped Price which expires 28th February.

Consumerist

HeatherKM wrote: »

I tried to swap deals but couldn't find my tariff...I'm with Ovo on Cheaper energy fixed deal which ends in April this year but none of the selection of tariffs available matched my unit rates and standing charges??

Don't worry too much about not being able to find the tariff you are currently on; it probably just means the tariff is not currently available to new customers.

Your current tariff details are only used to calculate what Ofgem deems to be "savings".

You're only really interested in what a new tariff will cost you for a full year so use any standard variable tariffs as your "current tariff" and then ignore any "savings" claimed. The list you get will display tariffs available to you in cost order. Make your selection from the list but be aware that some of the cheaper deals, from new kids on the block, have received some criticism on this site.