connecting to a better deal

Connecting

to a

Better Deal

Attitudes towards Switching Energy Suppliers

Derbyshire Districts

Citizens Advice Bureau

April 2013

Connecting to a Better Deal: Attitudes Towards Switching Energy Suppliers

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Contents

Executive Summary 3

Who Switches their Energy Supplier and Why? 5

Who Doesn't Switch and Why? 7

Collective Switching 10

Recommendations: How Can Customers Get Cheaper Energy? 12


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Executive Summary

The idea of shopping around to get a bargain is not a new one. Whether it’s comparing the

prices in the supermarket or searching out the special offers in the local paper, it’s

something we all do. The energy market is no exception. With a plentiful choice of

available tariffs, energy plans and payment methods, the potential is there for most of us to

switch to a better deal. And customers who have never switched before could save as much

as £300 on their annual bill(1).

Yet most studies suggest that few energy customers switch their supplier – between 15%

and 17% percent of the market, according to a Mori poll(2). In fact, there are indications that

this is a decrease on previous years. This is set against a background of increasing energy

costs, greater awareness of the benefits of switching, and an increase in resources and

information about switching. There is also an extremely healthy online price comparison

industry, but whilst these services are heavily utilised for products such as insurance, there

appears to be some reticence in comparing energy prices.

More recently a number of collective switching schemes have been launched, and while it is

too early to say what impact these will have on the energy market, there is clearly potential

for such schemes both to deliver significant savings based on the power of collective buying,

and for them to reach out to customers who have not previously considered switching their

supplier. Such potential, however, will not be realised until we can better understand

customers’ attitudes towards switching and until we can comprehend and overcome the

barriers that prevent them.

Understanding Energy Customers

In March 2013, Derbyshire Dales, Amber Valley and Erewash Citizens Advice Bureau

undertook an exercise to obtain a snapshot of its clients’ attitudes towards switching energy

suppliers. For the purposes of this study our clients can be characterised in three ways:

1. Clients with specific energy-related issues – these include clients querying billing

discrepancies, technical and maintenance issues, those with energy arrears and

those experiencing inadequate levels of customer service.

2. Clients with other debts or experiencing budgeting difficulties. In such cases advice

on securing cheaper energy supplies forms part of our efforts to stabilise our clients’

finances.

3. Clients who did not present with any of the issues above, but whose opinions on

switching we sought nonetheless.

We identified that a significant proportion of our clients were not taking advantage of the

savings they could make through switching their energy supplier. The main reasons were as

follows:


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1. Many of our clients are prevented from switching because they have outstanding

arrears. Due to the nature of our client base it was to be expected that a good many

of the people we see would fall into this category.

2. There is either a lack of information about switching suppliers, or more likely the

information that is available is not reaching the right people. This gives rise to

misconceptions about the complexity of the process.

3. There are a confusing number of tariffs and energy plans on the market, with many

different features and eligibility criteria. This makes it very difficult for clients to

compare tariffs in a like-for-like way in order to find a tariff which best fits their

circumstances.

4. Inadequate information and poor customer service often make it difficult for

customers to get basic information about their accounts and resolve disputes.

Whilst poor service can be instrumental in a customer’s decision to leave a supplier,

it is, at the same time, a barrier to switching.

The information in this report is drawn primarily from a survey of visitors to our bureau

carried out over several days in March. This is further expanded upon by more detailed case

studies collected during the course of our advice and social policy work, the intention being

to gain a greater insight into customers’ reasons for switching, the barriers to switching and

their understanding of collective switching schemes.


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Part One: Who Switches their Energy Supplier and

Why?

Question: Have you ever switched your supplier?

We began our survey by dividing our sample into two groups, those who had switched their

supplier, and those who hadn’t. Surprisingly more than half of our sample had switched

their energy supplier, significantly more than indicated by a number of national surveys.

The majority gave ‘price’ as the reason for the switch.

Question: How did you switch?

We then asked how our clients had found their new supplier.

Only 10% had used a price comparison website

30% did the work themselves, personally phoning or visiting the websites of energy

providers.

The majority of our sample, 60%, switched as a result of marketing activity.


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None of our clients had used a collective switching scheme. Marketing and information

clearly play a big part in the decision to switch. The majority of these clients said that they

changed after receiving a phone call or a visit by a doorstep salesperson.


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Part Two: Who Doesn’t Switch and Why?

We wanted to know whether clients who had not switched were averse to the idea of

switching in general, or whether this behaviour was confined to energy providers. We

therefore asked which other products they had switched.

Clearly there is a big difference between those who switch insurance and those who switch

their bank accounts. Understanding the differing attitudes to these two products might give

us some insight into why some people are reticent to switch their energy provider. One

reason might be that there is a greater spread of insurance products, and therefore a

greater potential to make savings. Alternatively, it could be that it’s simply easier to switch

your insurer. It’s a product which sits in the background until someone needs to make a

claim. Changing your bank, however, entails setting up new payments, informing

employers, creditors and so on of the change.

Our next two questions explored possible motives for switching, and the perceived barriers.

We first asked our clients what were their most important considerations when choosing an

energy supplier. Unsurprisingly all our respondents answered price. More tellingly, 80%

also listed customer service as equally important. We might perhaps infer from this that

many of our clients have been on the receiving end of shoddy service, and this is something

that we often find in our face-to-face work, as this example demonstrates.


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Clearly when a customer receives this kind of treatment, customer service will inevitably

become a factor in their future choice of supplier. It’s also worth noting that difficulties in

communicating with your supplier, difficulties getting information about tariffs and usage,

and the inability to promptly resolve any issues or disputes, all restrict customers’ abilities to

make an informed choice about suppliers, and to follow through with a decision to switch.

Case Study 2

The client is single, retired and is concerned about the high costs of her energy bill. She

complains regularly to her supplier about the costs, and on one occasion was given a rebate of

£40. However, she is no closer to understanding why her bills are so unusually high. Her home is

heated by storage heaters, although she claims she does not use them. After investigation we

discovered that the client had been transferred to a different energy plan, although she had not

initiated this change herself – in fact, until our involvement the client knew nothing about this.

The client has written to her MP who has promised to look into the matter.

In the meantime we have suggested to the client that she look around for a cheaper energy

supplier. She previously tried to change to British Gas, but was told that she has a meter which

they don’t deal with. This complication, plus difficulty understanding the many different

available tariffs and fees, have made it difficult for the client to make any progress with switching

her supplier.

Case Study 1

The client is 71 years old and lives alone in a rented property. He is disabled and in receipt of

Pension Credit Guarantee, and relies on electricity as his only source of energy.

By the time the client visited Citizens Advice he had already been having problems with his

supplier for six months. In that time his monthly direct debit had increased from £19 to £24, but

then immediately prior to his appointment he was informed that it had risen again – although

this time it had doubled. The client wasn’t able to say exactly how much it would be as he

actually received two separate notifications, bearing the same date, one telling him that the

amount had increased to £45, the other quoting £59.

The client had already spoken to his supplier on numerous occasions, but could not get any

clarification on the actual amount, nor any explanation for such a meteoric increase. In fact, the

supplier’s only concern was in taking a payment from him, which the client made despite this

leaving him without money for food.

We attempted to telephone the supplier but could not get through after being kept on hold for

over 20 minutes. With no other option we skipped to stage 3 of the complaints procedure (steps

1 and 2 of their procedure being reliant on the supplier being able to answer the telephone in a

timely fashion).


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In the above case the client may possibly be on the cheapest plan available to her.

However, because she doesn’t have sufficient information about her current supply, she will

have difficulty making a comparison with other suppliers.

Both these cases demonstrate that communicating with energy companies is not always as

straightforward as it ought to be. Because of examples like these we often get the

impression that clients avoid switching because they don’t want the hassle of dealing with

their energy supplier. But when we asked our non-switching clients what they thought were

the major barriers to switching, we found that other factors scored higher.

Relatively few people thought that the hassle of changing suppliers would deter them from

switching. And indeed when we asked those of our clients who had switched about their

experiences, 80% said that they encountered no difficulty.

Clearly a number of our sample are prevented from switching as they have outstanding

arrears. Several also said that there was simply too much choice, finding that the vast

number of different tariffs was bewildering. A significant selection of our clients reported

that they were suspicious of companies’ offers, suspecting hidden charges or imminent

price rises which would wipe out any savings they might make. However most of our

sample simply believed that they had nothing to gain by switching supplier, convinced that it

would make no difference.


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Part Three: Collective Switching

In the third part of our survey we wanted to assess our clients’ attitudes to collective

switching. Collective switching is a relatively new innovation in the UK, although it has

proven successful elsewhere – notably in The Netherlands where the organisation Met de

Stroom Mee managed to secure average savings of 20% on household energy bills (3).

Fundamentally the idea is to use the power of collective buying to negotiate cheaper energy

supplies. Notable collective switching schemes were launched in 2012 by Which? and

www.thepeoplespower.co.uk and in 2013 many local authorities have initiated similar

schemes.

We first wanted to find out what information our clients had about collective switching

schemes.

Question: Are you familiar with collective switching schemes?

Of the small number who were aware of the existence of collective switching, none could

name a specific scheme.

We explained to our clients how collective switching schemes work, and asked them what

they felt would be the advantages of such a scheme.

http://www.thepeoplespower.co.uk/


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Our clients identified two advantages. The first, that the power of collective buying has the

potential to secure cheaper tariffs than could be obtained by an individual shopping around

on their own. The second advantage was that in a marketplace that is swamped with such a

confusing number of tariffs, such a scheme would do much of the work for you. However,

the majority of our respondents did not immediately recognise the advantages of collective

switching.

Finally we asked our clients what would deter them from using a collective switching

scheme.

It’s interesting to note that a greater percentage of people felt that joining a collective

switching scheme would be more hassle than actually switching supplier. However, it

should be noted that most of our clients were not familiar with collective switching, and

that these opinions are therefore their initial impressions. With more information, and

having had time to consider the pros and cons, the picture might be very different.


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Recommendations: How Can Customers Get

Cheaper Energy?

There is a clear consensus that customers who regularly switch suppliers can obtain cheaper

supplies. And whilst there may not be similar agreement about whether collective switching

schemes have been, or will be, able to deliver significantly better results than individual

switching, it seems obvious that the more subscribers they have, the greater their

bargaining power and therefore the greater chance they will have of success.

For these reasons it is proper that clients should be encouraged to consider switching, either

individually or collectively, when and where it is appropriate. Our report suggests that

organisations should consider the following points when promoting the benefits of

switching energy suppliers.

Clients respond to the actions of energy companies. We have seen how marketing

activity persuades people to change supplier. If switching is to become a greater

part of the UK energy market, then it has to be promoted in a similarly high-profile

way.

Price predominates as the biggest reason for switching. However customer

experiences, both positive and negative, have an influence on the choice of supplier.

Organisations offering advice on switching must take into account that price is not

the only factor, and in some individual cases may not be a factor at all.

Switching energy supplier is no more complicated than switching insurance, which

many of our sample were far more inclined to do. Those respondents who had

switched found it a painless experience. This hints at a misconception about how

difficult it is to switch energy supplier; a misconception that needs to be addressed if

more people are to be encouraged to switch.

There needs to be more information to help clients understand their energy bills, so

that they are then able to make informed choices. Partly this is down to the

confusion of different tariffs, payment plans, discount schemes and so on. But there

is also evidence of cases where energy companies have not been able to provide

their customers with accurate and up to date information about their energy bills.

‘Non-switchers’ find it difficult to believe that switching suppliers will make any

difference to their energy bills. Although marketing was a major influence for our

switchers, many non-switchers said they were suspicious of claims made in

marketing materials. The majority of our non-switchers expressed cynicism,

believing that ultimately switching would make no difference. If more people are to


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be persuaded to switch, it needs to be demonstrated that there is a significant, long-

term financial advantage.

Clients are largely unaware of collective switching schemes, and such schemes will

need to generate much more publicity to get a foothold in the market. There are

two perceived advantages to collective switching, and these are the elements that

need to be highlighted. Firstly, switching is perceived as a complex process. Whilst

this may not be the case, certainly the work involved in finding and comparing tariffs

can be time-intensive. A collective switching scheme can shoulder the burden of

much of this work, stripping away unsuitable offers and presenting the customer

with a simplified choice. Secondly, the power of collective buying has the potential

to deliver significantly cheaper energy. A collective switching scheme therefore

needs to demonstrate that it can deliver greater savings than individual switching.

In conclusion we found that a significant number of our clients felt that they were better off

after switching their supplier. We would like to see more energy customers benefit in this

way. And whilst we congratulate the gentleman who joyfully scrawled on our survey, in an

exuberant hand, that his employer paid all his energy bills for him, sadly most of the people

we see are not in this fortunate position. We therefore believe that any action clients can

take to relieve the demands on their already over-stretched finances is something that

should be encouraged.

References:

1. More than 10% of the estimated quotations raised by users of the Simply Switch Website to

switch their gas and electricity suppliers in Nov 2012 and Feb 2013 produced a predicted annual

saving of £300 or more.

2. Customer Engagement with the Energy Market - Tracking Survey 2012

3. Going Dutch: Local Government and Fuel Poverty, www.nlgn.org.uk

http://www.nlgn.org.uk/

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