Ronald Reagan was the king of one liners. He once famously said the most terrifying nine words in the English language where: "I'm from the government and I'm here to help".
Reading the Competition and Markets Authority’s report yesterday on how to fix the energy market we can start to see why he felt this way.
One of the most extraordinary and less reported findings is that much of the blame for higher energy prices and higher supplier profits can be laid at the door of the energy regulator Ofgem. This is the body set up by government to help and protect energy customers. The report also directly criticises Government for meddling with Ofgem's remit and meddling in the wholesale energy market and that concludes that this has also pushed up customers' prices unnecessarily.
So has the CMA done any better? Before directly answering that question we think it is important to state one important truth. The problem in the energy market is not the customer. There seems to be a conventional wisdom underpinning all the analysis of the market that part of the problem is that customers are “sticky”, “inert” or “disengaged”. Some have even gone so far as describing them as “lazy”. If only more customers would engage all the markets problems would be fixed. This needs to stop. Customers are none of these things and are not, and can never be, the problem.
Customers are just like you and me. They lead busy lives and have competing demands on their time whether work, family or fun. They are also creatures of habit. It is less than 20 years since the market was opened to competition. So for many older people the idea of changing your energy supply is still relatively new. Energy is not an interesting product. Customers don’t get the same pleasure out of choosing their energy supplier as they do from buying a new pair of shoes, booking a holiday or even buying a new mobile phone.
Against this background suppliers and price comparison websites have done remarkably well to persuade 2-3m customers a year to switch. But the CMA has shown us that at least 18m customers don’t want to do this or can’t find the time to do this several times a year. But they probably don’t like paying £350 more a year for their loyalty to their existing supplier.
It has also revealed there is a much bigger problem with the business model of these comparison services. Their interests are not aligned with the customers they are trying to help because they take commissions from energy suppliers. They won’t always point you to the best deal and they won’t tell you if a better deal comes along for a year after you switch. The CMA’s remedies will make this worse as price comparison sites will be able to show you a smaller number of suppliers (only those who pay them commission) as long as they declare who is missing. So customers will have to look at several comparison sites and possibly go direct to some suppliers to get the best deal. More time, more hassle.
That is why we set up Flipper. To help the 85 percent of customers who don’t want the hassle. We scan the whole market, take all the effort out and give you a simple sign up with no need to tell us anything more than your name and address. We charge a small fee so we can always find you the best deal and regularly check to make sure you are always on the best deal. We will also make sure your monthly payment is set at the right level so you don’t run into debt or end up overpaying for the energy you use. We give you peace of mind you are getting the best deal with no effort. All the time.
This will become more valuable as the market develops. The CMA has rightly removed the restrictions Ofgem placed on how many tariffs suppliers can offer. We will see new tariffs offered aimed at different patterns of use. Tariffs for people who don’t use much gas in the summer when their heating is switched off, or have very energy efficient houses and don’t use much energy at all. As smart meters roll out there will be cheaper tariffs for customers who don’t use much energy during the day because everyone is out of the house. Tariffs that allow you to save money if you can shift some of your energy use to the evening or weekend by putting your dishwasher or tumble dryer at these times. This will benefit many customers but it creates even more need for services like Flipper to help customers navigate this new, more vibrant market.
We only asked the CMA to do one thing. Give us the same access to some basic industry data as suppliers so we can make our service as simple, quick and low cost as we can. We are grateful that the CMA listened to us and did this.
It also might surprise you that we don’t support their proposal to create a database of unengaged customers. We don’t think these customers want Ofgem to hold their personal data and to be bombarded with marketing material.
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