‘Government energy tariff switching plans will spark marketing bubble’
Government plans to make switching between energy firms simpler will create a marketing bubble around the battle for billpayers, but will not improve apathy towards the Big Six as the “cost and time of switching” has never been the main issue, industry observers warn.
The comments come in response to plans announced today (31 October) to make it easier for consumers to switch energy providers within 24 hours, rather than the five weeks it currently takes. The government says switching could help people save up to £400 a year and improve competition, which some MPs claim is non-existent due to the perceived monopoly of the market by its biggest players.
Ed Davey, energy and climate change secretary, said three of the Big Six - EON, Scottish Power, SSE - had already come forward to support the initiative, adding others would be told they must, without increasing consumer bills. The measure is one of several the Government is introducing to try to give customers more control of their fuel costs amid rising prices.
Davey claimed he was concerned that it was the “smartphone generation and the internet savvy” that were getting the best deals at the expense of the “fuel-poor”.
He added: “The energy industry needs to change to put consumers in control. That means making it easy for people to change supplier to save money, it means regular market assessments to check their behavior, and it means tougher penalties for market manipulation and putting an end to opaque finances.”
Industry observers say the clampdown is likely to bear similarities to the financial sector, where a recent move to improve switching between banks saw many ramp up their marketing to attract new customers. The energy sector’s “marketing bubble”, however, will not dampen its negative perceptions, according to Kevin Peake, group marketing director at Clifton Asset Management and former Npower marketing director.
Peake adds: “Time and cost of switching [suppliers] has never been main issue – [its really been about] apathy and lack of cost or price differentiation.
“It’s not as easy as bank accounts as you need meter data and that’s not available like banking data - ultimately the market will only correct itself with the capability of smart metering.”
Richard Lloyd, Which? executive director, echoed the concerns, adding there will be “no great applause” from the millions of consumers worrying about rising energy costs for the Government committing to make the regulators “simply do their job”.
The plans to improve switching are part of a review of energy competition and prices outlined earlier today. The inittaive is being led by industry watchdog Ofgem, which is expected to report annually on three areas: the barriers to entry for smaller suppliers, review prices and profitability and assess how easy it is for billpayers to switch suppliers.
The energy industry welcomed the plan, with British Gas claiming it would encourage more customers to engage with Britain’s competitive energy market”. The utilities firm along with rivals Npower, SSE and E.ON have ramped up their media spend in recent weeks in an attempt to cut through to homeowners on factors such as service, amid industry-wide price hikes.