Note to Energy Minister: it’s not just laziness that stops switching

Note to Energy Minister: it's not just laziness that stops switching

Many homes can make £250+ savings by switching energy, but a large proportion don’t do it. Energy Secretary, Chris Huhne’s been widely quoted as blaming public laziness. As I’ve been nagging, pushing, and trying to persuade people to switch for 10+ years, I thought it worth noting down what barriers I’ve noticed.

To be fair to Chris Huhne, his actual quote to the Times was:

"They do not bother, they frankly spend less time shopping around for a bill that’s on average more than £1,000 a year than they would shop around for a £25 toaster.

"If they got that in perspective and said, ‘OK, we are going to spend a little bit of time shopping around’ [they] could save very substantial amounts of money."

Yet that’s just the start of it, he’s also discussed the many structural problems around the industry and set out some pretty decent steps to help address it (see Top ten energy ‘need to knows’ news story)

Seven reasons people don’t switch

The crucial issues I’ve come up against are …

  • Burnt by switching at wrong time in the past

    Politicians/regulators/comparison sites shouted ‘switch’ even when it’s not time.

    The blunt message ‘you will switch and save’ has left many who followed it burnt, and has tarnished switching’s reputation.

    This is because when you switch, is just as important as switching itself. The knee-jerk reaction after a big energy company puts its prices up is to try and find a cheaper supplier – yet often that’s wrong. 

    Unfortunately in their well-meant ardour to encourage people to move politicians, the regulator and some comparison sites must shoulder some responsibility – as they’ve pumped out the ‘switch’ message whenever the opportunities arrived.

    In fact, energy companies are like sheep, when one moves the others follow (breaking that cartel is a blog for another day). So do a comparison the day after one of the big six energy providers puts prices up and you’ll inevitably move to a firm that itself will hoick prices a few weeks later. 

    This has scarred many who then say ‘what’s the point?’. For years in our Cheap Gas & Electricity guide we’ve had a ‘time to switch’ traffic light indicating whether it’s a good time or not to try and avoid this. 

    Sometimes we say ‘DON’T SWITCH’ as it simply isn’t a level playing field to compare (right now though, it’s perfect). In recent times it’s got even more sophisticated – such as ‘fix or stick’ as there were still cheap fixes available.

  • The apathy issue
    We must get across how big the savings are.

    Of course as Mr. Huhne says for some, a smaller number, there is some intransigence, people who can’t be bothered, or don’t realise the exact savings they could make.

    Even some who start then find their tariff name isn’t on the bill or they can’t work out how to do it – and fall at the first hurdle.

    Though I do worry that some of these people have heard others talking of bad experiences and don’t realise the difference it can make.

  • Confusion and complexity
    If you don’t intuitively understand the price, changing is scary.

    Energy companies have a myriad of different, similarly named tariffs, with complex price structures which make understanding the differences a nightmare.  

    People often think about their supplier by firm – actually they need to think by tariff. One company can offer both the UK’s most expensive and cheapest deal, depending on the tariff you’re on.

    Of course, using a comparison site makes it easier, but the lack of the ability to intuitively understand the pricing model means people are reluctant to trust because they don’t understand.

    This is especially true for many elderly people – those for whom heating is most important. They come from an era of, you have your supplier, you pay the bill. 

    The door knockers who’ve come over the years each promising "to save you money" hurt those elderly people who still trust what they’re told face to face.

  • Inability to switch, or switch and gain
    Those on prepay meters, without web access.

    Not everyone can switch and save. There are structural problems. Some are locked in due to past energy debts, others forced to stay on prepayment meters, while there is some competition (see the Prepay energy savings guide) the benefits can still be limited.

    Then there are those without the web who lack access to the cheap online tariffs and the comparison sites.

  • Nightmare switching experiences
    Timing, problems, and energy salesmen.

    There are of course those who’ve suffered a never ending hell after switching, when the transfer doesn’t take place properly. Or it does but it drags on for months. This has improved, but the institutional memory people have still leaves many put off by fear.

    Then of course there’s the door knockers and salesmen (see the I was told to read porn before selling energy news story). Not all are bad, but many have mis-directed and mis-sold and given the whole industry a bad rep.

  • Direct Debit and price confusion
    Again, people are burnt as their cost dropped but debit increased.

    Many people get confused between the cost of energy and the money coming out of their account each month. Energy companies set Direct Debits by estimating annual usage and dividing it by 12.

    Different companies use different estimates, so it’s common to hear people moving to a cheaper rate, but asked to shell out more each month. Of course, their overall cost will be less, but the psychology and impact on cash flow makes it feel a loss more than a gain.

  • You may be saving but what you pay increases
    In a rising market, you can switch and save but pay more.

    This is another of those ‘burnt in the past’ issues.  It’s a conceptual one that some struggle with. If prices are rising by 20% and you switch to a company that’s 15% cheaper, you’re still going to be paying roughly 5% more than before.

    People struggle with this as they feel like they should save. Of course, compared to what they would’ve paid there’s a reduction, but it feels like a rise – again negating the sentimental gain of switching.

Have I missed any? Let me know below.