Does This Mean The End Of Cashback On Energy Products.

Cardew

molerat wrote: »

The cash back will just be part of the advertising budget. Do you think that the tv, newspapers and radio stations "add value" to the product without "creaming off millions" ? If the rules change I expect I will still be paying without a chance of seeing any of it back. At least with the current situation I am eligible for a piece of the action too.

Cashback is not the only factor.


The amount of people switching accounts(Churn) means a large number of extra staff are required in the Utility companies. Another overhead for which we pay.


Evidence given to a recent Parliamentary Committee indicated that a large percentage of customers actually switch to a more expensive tariff.


To repeat, nobody is criticising the 'tariff tarts'. However I cannot understand the reasoning that justifies a clearly inefficient and expensive system of comparison websites on the grounds that you get a 'slice of the action'.

Consumerist

Cardew wrote: »

Cashback is not the only factor. . .

The term "churn" really refers only to unnecessary switching. People who have used comparison sites to inform their switching decisions are not being churned. On the other hand, energy suppliers are more likely to churn their customers by giving misinformation over the telephone. This is probably the primary reason why energy customers are switching to more expensive tariffs and is a very good argument in favour of the comparison-site approach to switching.

I really cannot accept your premise that energy customers should not switch because of the cost of processing. Should we all stop switching banks, insurance companies, telephone companies, etc. because of the processing costs to those companies?

It is probably true that if we were starting from scratch, a more efficient comparison system could be organised but it is in the nature of entrepreneurs to provide a service where they have identified a need which they can satisfy and is financially viable. When the energy market was opened up to competition, the government left a vacuum which the comparison-sites filled and which has since evolved into a regulated market. It seems to me to be a bit late in the day to be carping about how they have made a success of what they do or how they do it.

For myself, I use comparison sites when my prices are about to change or my contracts are about to end. They may not be perfect at what they do but they save me a lot of time by gathering all the data I need in one place and I don't pay directly for the service. I always use Ofgem-approved sites so that I can expect a minimum standard of service under the Confidence Code. For me to collect the data, assuming I could even find it on suppliers web-sites, and keep it up-to-date would be like painting the Forth Bridge. Comparison sites have all the data and it is remarkably up-to-date, as required by the Confidence Code.

I don't know what I would do without the comparison sites; the cost in terms of my time would be prohibitive. Once we get some real competition in the energy market, I reckon their financial costs will look after themselves.

Cardew

Consumerist wrote: »

I really cannot accept your premise that energy customers should not switch because of the cost of processing.


I have not suggested or implied people should not switch.

I don't know what I would do without the comparison sites; the cost in terms of my time would be prohibitive. Once we get some real competition in the energy market, I reckon their financial costs will look after themselves.

Likewise I consider a comparison site is essential. However a single independent government sponsored site would suffice.


As said earlier, the comparison websites' sole motivation is to maximise commission; and that is often at odds with ensuring that the customer gets the best deal.


You and I and other 'anoraks' might well only switch supplier when we have weighed up the options presented. However I suspect you under-estimate the lure of a bottle of 'free' champagne or Nectar points!


I really don't know how we get 'real competition' in an industry selling the identical product, delivered by exactly the same means.


Yet one factor that could help - the costs a multi-million pound parasitic industry - you appear to dismiss.

Consumerist

Cardew wrote: »

As said earlier, the comparison websites' sole motivation is to maximise commission; and that is often at odds with ensuring that the customer gets the best deal.

In the context of energy comparison sites, the Confidence Code requires an unbiased presentation of the comparison even if the site cannot initiate a switch. My only criticism in that regard is that it is not always made clear how you can opt to see ALL energy suppliers in the market as opposed to only those for which the site can initiate a switch.

You may have a point, however, when it comes to other markets such as insurance, telephones, etc. but they are not really the subject of this thread.

To illustrate a point, I recently applied to switch to Co-op Energy. I started at the Co-op Energy website to complete an online application and before I knew it I was filling in my details via the energyhelpline website. Being suspicious, I abandoned the application and started again. Lo and behold, I finished up in exactly the same place on the energyhelpline website.

The point of this story is that it occurred to me that Co-op Energy probably didn't want the expense of setting up and maintaining it's own secure applications facility and handed it off to energyhelpline so as to SAVE money which it is then able to pass on to customers.

So there is a kind of symbiosis between the comparison sites and energy suppliers which can work in the customer's favour.

sky111

Comparision sites have been saved.


http://www.moneysavingexpert.com/news/utilities/2014/01/energy-cashback-saved-from-total-ofgem-ban




Wow! breath a sigh of relief for all those employed with these sites
and the users who get cashback.


But, I totally agree with Cardew and believe we are paying for the costs of a multi-million pound parasitic industry. One comparision site run through Ofgem is all that is necessary.


I wonder why Moneysavingexpert (sold to MoneySupermarket.com for £87m) would campaign to save comparision sites? Worried that the whole comparision site industry would collapse?
Anyone got a plan to open up another site to take a slice of the action, ideally a site that passes on to the public the largest cut for each sale passed through its site?

Consumerist

sky111 wrote: »

I totally agree with Cardew and believe we are paying for the costs of a multi-million pound parasitic industry. One comparision site run through Ofgem is all that is necessary.

The fact is we are paying for the costs of multi-million pound parasitic industries in all markets, not just the energy market. Advertising, public relations, law are just the tip of the parasitic iceberg.

From the article :-

After lengthy discussions, it confirmed to us that while the complete ban will still stand in its rulebook, it's indicated it won't take action against suppliers if comparison services offer cashback, as it understands consumers will lose out if this is not available.

So what is that supposed to mean? What is the point of having rules if Ofgem won't enforce them? Why not modify the rules to allow cashback in the circumstances it accepts so everyone knows where they stand? Ofgem are hopelessly out of their depth and always have been.

I wouldn't trust Ofgem with the washing up. They are a waste of space.

Cardew

Consumerist wrote: »

The fact is we are paying for the costs of multi-million pound parasitic industries in all markets, not just the energy market. Advertising, public relations, law are just the tip of the parasitic iceberg.


Whilst the above is true, the energy industry is totally different.


Firstly the comparison with advertising is not valid IMO. It is not a case of persuading us to buy gas/electricity instead of another product - we have no choice in the matter.


Secondly we buy EXACTLY the same product, delivered by EXACTLY the same means pipes and wires.


Thirdly the comparison sites have a vested interest in directing customers toward the companies that pay them commission. e.g Do you only want to see companies that this website can direct you toward?


Or to grade companies by their service standards; I wonder what criteria is used to judge?


A site run by Ofgem/EST would be able to give completely unbiased factual information.

From the article :-

So what is that supposed to mean? What is the point of having rules if Ofgem won't enforce them? Why not modify the rules to allow cashback in the circumstances it accepts so everyone knows where they stand? Ofgem are hopelessly out of their depth and always have been.

I wouldn't trust Ofgem with the washing up. They are a waste of space.

So Ofgem doesn't want people bribed by the Utility companies to switch; but allows a 'third person' to offer bribes on their behalf. You couldn't invent it!


Take this choice:


Company A has the cheapest tariff but pays no commission to the comparison website who obviously then give no cashback.


Company B has more expensive tariffs but gives high commission to the comparison website who give cashback.


Which company will they website 'direct' potential customers toward?


It would be interesting to see the revenue received by all the Comparison websites AND the amount of cashback they pay out.

Consumerist

My understanding of Ofgem's current position is that energy-comparison sites, if they offer cashback at all, must offer the same cashback for switching, no matter which supplier is switched to.

That sounds reasonable in terms of impartiality except that some of the smaller suppliers don't allow comparison sites to initiate a switch. So that would mean the smaller suppliers would be at a disadvantage unless they allowed comparison sites to initiate a switch. To me, that looks like putting pressure on the smaller suppliers to opt in to paying the comparison web-sites to initiate switching.

Ofgem, or any other agency, operating a monopoly comparison site is a frightening prospect, if you ask me.

MillicentBystander

Usual pathetic 'solution' from Ofgem. You do really wonder who's side they are on here (actually, scratch that, anyone with an ounce of sense already knows the answer to that one.)

penrhyn

Thank you OFGEM for your most excellent SNAFU.