Switching sites aren’t responsible for higher energy bills, here is why:
It would appear that one of the recent new entrants into energy supply, a well-known brand outside of the energy space, have taken it upon themselves to put the boot into switching sites.
The suggestion seems to be that because switching sites get paid a commission from some suppliers to facilitate a switch to that supplier; these sites actively attempt to coerce consumers to switch to those suppliers that pay them at the expense of suppliers that do not.
This is also, apparently, one of the grubbiest secrets in the energy industry and is responsible for the inflation of consumers prices by millions of pounds. As the person responsible at MyUtilityGenius for successfully negotiating (or not as the case may be) these commercial contracts with suppliers; and also ensuring that MyUtilityGenius is compliant with the OFGEM Confidence Code I can categorically state that this is not the case.
Indeed it is somewhat surprising that someone with such a heavyweight position in the supply market should display such ignorance of not only the OFGEM Confidence code; but also the commercial basis on which their supply company must run. It would seem that there is an assumption that deploying a direct sales force, spending a fortune on both above and below-the-line advertising & marketing is more efficient in customer acquisition than paying a price comparison site and also cheaper. Really?
A cynic might say that the true reason a supplier with an inability (or a reluctance) to compete on price would dislike comparison sites is that they focus a consumer on the very thing they want them to ignore, the price. And yet suppliers with unique propositions such as Good Energy, LoCo2 and Utilita – none of whom attempt to compete on price in a race to the bottom – are content to pay switching businesses for every switch that comes their way. That’s because they are grown up businesses that are prepared to pay for a service rendered; and because they do have a unique proposition that reaches beyond price. If, on the other hand, you are simply trying to flog a Fiat at Ferrari prices then don’t be surprised if you don’t sell many Fiats. As some well-known singer once mused “A monkey in silk is a monkey no less!”
Let us look at the confidence code; perhaps a 101 lesson might help those deluded souls who believe that a switching site is in league with the devil:
- An OFGEM accredited switching site has an obligation to allow consumers to evaluate the whole of the market. This is irrespective of whether that supplier is prepared to pay the switching site for any consumers they might receive. Why don’t you switch us anyway, out of the kindness of hearts, you might ask. Well actually – even if I wanted to; and I naively entertained the idea at one point, the suppliers will not engage with you in terms of data processing unless you have a commercial agreement with them. Taking all your complex switching data, as well as the personal information you as a consumer rightly expect to be data protected, requires some pretty robust back office IT processing and unless the supplier engages with you as a switching site on this it is impossible to switch anyone.
- Switching sites are controlled at a micro level in terms of their display by OFGEM’s rules – for instance the estimated annual spend of the new tariff has got to be of a greater font size and more prominent than the savings figure. The Confidence code runs to 12 pages and principally focuses on fairness and impartiality.
- The code allows for switching sites to enable a filter that displays only tariffs to which that switching site can switch you – namely the ones it gets paid for. This is sometimes the default ticked setting on a site and sometimes it is not; MyUtilityGenius defaults to the whole of market comparison. This facility was enabled because otherwise it would be possible for suppliers (such as the one complaining no doubt) to avail themselves of free advertising on comparison sites. The switching sites fought for this option to be allowed because this is a market where the supplier holds all the cards; not the switching site, and we need some way to pay for the inordinate amount of IT work and compliance that goes into maintaining a complex calculator and database with constantly changing prices, display requirements and regulatory obligations.
- Related to the confidence code; but none-the-less worth a mention, is the fact that a suppliers licence conditions force it to offer the same tariffs and prices irrespective of where that product is for sale. Thus it is a fallacy to assume that contacting the supplier direct will get a customer a better deal; if it did the supplier would be in breach of their licence conditions and OFGEM would take a pretty dim view of that.
As a relative newcomer to the domestic markets having previously spent 12 years in the Industrial and Commercial end of the energy supply industry perhaps the biggest surprise to me was the ambivalence of the Big 6 suppliers to the idea of business acquisition. Anyone perusing our website would very quickly note that we have commercial deals with practically every small supplier in the UK and yet only 2 of the big six. This means whenever we display results we are unable to switch consumers to those 4 companies and their sub-brands (supermarkets and the like). Luckily for us the new suppliers tend to be very price sharp (a few exceptions notwithstanding) and so this doesn’t materially affect switching to the top tariffs. But we still have to display all of their tariffs and we do so faithfully and honestly; we just can’t switch consumers to them. Why have they adopted this attitude?
In a nutshell; it is because these companies consider yet another switching site more trouble than it’s worth. Bear in mind that the Big 6 has 98% of the market. In their world what they lose this year they will get back in the next 5 years or so. Market share has remained stubbornly constant for them all since deregulation. Every attempt they have made to increase sales has led to fines and PR disasters due to misselling and so they have, in the main, given up. Oh they will pay lip service to the idea; and down in the trenches are plenty of well-meaning employees trying their best to help and make a difference; but at a board level they are quite happy with their share and everything is focused on retention and upselling. Even cash-back; the sales and retention favourite of recent times; is being drop-kicked into the long grass by OFGEM due to its ability to suck the people at the margins into deals that give now and then take, take, take over the life of the deal. In that respect they could be likened to pay day loans – and look what a great press those have got.
Switching sites like ours might not be perfect but speaking for MyUtilityGenius (and no doubt most of the others) we have a genuine interest in presenting consumers with options, information and a viable choice that offers value at no additional cost to the consumer; hidden or otherwise. We are also looking at ways to overcome consumer apathy through innovation. Any supplier knocking that should take a long hard look in the mirror regarding their own ethical position and consumers should trust the facts and not the rhetoric of sullied brands.
Articles about Energy Switching:
At the time of writing SSE, British Gas, Npower, Scottish Power had all raised their prices by between 8% – 11%. (…)
Full version of OFGEM Confidence Code can be found here: