Ditch prepay meters for free and let MSE switch for you: ideas given to Chris Huhne
This meet came about on the back of the Energy Summit, (see my PM if prices don’t fall, this summit will be deemed a failure blog) and I was pleased it felt far more constructive. The minister seemed interested in gathering ideas and keen on genuinely checking out the feasibility of them. Here are some of the main things we suggested (it’s relatively scrappy as I just banged these notes out after the meeting).
Collective switching for the elderly and others.
Our system is predicated on ‘keep switching to save’. That’s fine for the information enfranchised, web using audience (see the Cheap gas & elec guide for how to do it!). Yet where it falls down are those who are scared or unable to switch. Whether this be the elderly, or simply people without time, or those who are unsure of what to do.
We discussed the concept of a ‘collective switch’. People would give their consent for an organisation – whether it be Age UK, MoneySavingExpert.com, a comparison site or another organisation, to be their switching agent. Then when appropriate, that organisation would mass switch everyone (probably via a mass negotiated collective purchase) – in an ongoing service.
This is something Consumer Minister Ed Davey is looking at the bigger picture of – I’ve spoken to him about it before. Yet as I said yesterday, the problem is there needs to be clear guidance from the Government and a legal ability to switch people over rather than dealing with complex contract issues – and a discussion of what liability the switching organisation would have.
While I suspect it wouldn’t mean everyone always getting the perfect deal – both due to the rapidity of change that’d be needed and the unwillingness of big energy companies to agree to super-cheap tariffs for so many – I still think you could keep people in the bottom 10-20% of prices with this system (back of the envelope thoughts).
We agreed to hold a further meeting on this (with others invited) to discuss how do-able it would be and what the barriers are. While it’d be a departure for MSE this is exactly the type of thing I think the site is in a perfect position to do – and it would help many people.
Of course though there are costs for any organisation running it (and an opportunity for enterprise) but I suspect they’d be smaller than comparison site referral fees, so may overall take costs out – not done accurate study of that though, so its only back of the envelope.
- Free credit meters for those on prepay.
The fact that some prepay customers have to shell out up to £200 to get a ‘credit meter’, (ie, a normal meter where you’re billed after use) which then gives access to more competition and cheaper tariffs, is a huge barrier (some can do it free though see our Cut prepay energy bills guide for help now).
A simple suggestion we made was that provided customers pass the credit check, they should be allowed to switch to a credit meter for free – but a fair price can be recouped if they leave that company within six months. This would overcome the cash-flow hump that blocks many moving to cheaper bills.
The minister did reply by asking if we could take it a step further and simply move people who qualified over automatically. My thought was that wouldn’t be good as a few people do still prefer prepay for budgeting purposes even though it’s not cheapest. Yet a letter offering it to all customers would work. In the long run it should be easier once smart meters are introduced anyway.
When you switch they shouldn’t be able to raise prices for 6 months.
This wasn’t our original suggestion, it was mentioned at the summit, but I think it’s a corking idea. One of the big switching problems is people tend to switch when one company has hoicked prices – yet they often move to a company who then follows suit. This rule would stop that happening and stop sales staff saying "we haven’t put prices up" to sell deals, when they know full well it’s likely to happen soon.
The alternative view being considered is a "transfer window" when companies can only shift prices twice a year.
Lockdown on the differential between tariffs.
The biggest problem with energy is we want people to ‘switch and save’, yet this punishes those who don’t. For example, one customer would pay £1,000 for energy that someone else pays £1,350 for. It’s a wrongful penalty for ignorance, apathy, fear or a lack of ability.
For me that makes it a failed marketplace. So I mooted the consideration of a differential cap – ie, a maximum 15% between the most and the least expensive. Of course the worry is they’d simply ditch the cheap deals at first, yet in the long run, simplified tariffs are what most people want (see the simplified tariffs poll results).
Tips not from the energy companies.
There are many reasons people don’t switch (see my Note to energy minister: it’s not just laziness that stops people switching blog) and are on the wrong tariffs. One of the energy summit actions was that energy companies would write to customers suggesting they switch to direct debit.
Yet who believes their energy company? Won’t that just be chucked in the bin as more direct mail spam? So we suggested we do a ‘ten tips for all customers’ that’s branded by us and (if they’re willing Which?, Consumer Focus, Age UK etc) and the Government to ensure everyone knows the crucial info about how to cut bills.
This would include such things as "you won’t save, but you will pay less than you would’ve done." For me this is what puts many people off. They’ve been burnt by being told they’ll save by switching but their bills don’t drop. That’s because when prices are rising, what switching actually does is stops the price going up (ie, if bills are up 20% and you save 20% it puts you back where you started).
This type of info on helping people to switch and on where to get free insulation, all from combined sources that are there to help, may actually do the trick.
Those were the big points from the meeting, though it was a long discussion and lots of other things were mentioned. I’d love your thoughts.
P.S. The best bit of the meeting was when the lights dimmed, as it seems true to cause the Department of Energy and Climate Change (DECC) offices have energy efficient motion sensor lights: cue Chris Huhne waving his arms above his head mid-meeting.
