Fake Energy Comparisons - Introduction
In February 2015 we published a research report which showed that the vast majority of energy price comparison websites inflated savings quotes by between £100 and £200 using the Personal Projection methodology introduced by Ofgem. Our analysis showed that this affected significant numbers of consumers and could lead to customers making bad switching decisions.
We considered this to be both misleading and mis-selling and called on regulators and politicians to:
1. suspend all energy sales activities that "inflated" savings
2. undertake a truly independent inquiry to investigate the level of consumer detriment that had been caused, to identify whether compensation was due and, if so, how much and who should pay?
We were not the only ones who considered exaggerating saving quotes to be misleading.
In a public report, MoneySavingExpert.com called the approach "an extremely damaging policy", "extremely misleading" and "harmful to consumers". (see Appendix B for more information)
It does of course raise the rather important question why MoneySavingExpert.com kept using an approach that they believed to be extremely mis-leading and harmful to consumers, but we will leave it to them to explain that one.
Our customers wrote in to tell us they thought that the behaviour of other comparison sites was "dishonest", others believed it to be "fraudulent".
Our calls however met with only limited success.
Energy and Climate Change Committee
Tim Yeo MP, then Chair of the Energy and Climate Change Committee said he was "interested to hear about our findings" and "noted your request for my Committee to look into this."
However, he was unable, at that time, to take it forward.
"Unfortunately, we have a limited time period between now and the election.... However, I have passed the details of your e-mail on to the Committee secretariat who will be compiling a list of potential issues for the new Committee to investigate after the election."
Edward Davey MP
Secretary of State for Energy and Climate Change
Ed Davey very much took the Ofgem line arguing in favour of the Personal Projection to calculate savings.
"Whilst we recognise that a case can be made for alternative ways in which to calculate a consumer's savings we are confident that Ofgem's Personal Projection approach will deliver a good estimate of possible savings from switching."
OK he probably never wrote that himself but likely got some muppet at Ofgem to write it for him but that was the position taken.
We wonder if Mr Davey would still be so confident if he realised customers were being quoted savings greater than their energy spend?
Our efforts to convince Ofgem that is approach is just plain wrong have, so far, hit a brick wall. To us Ofgem seem remarkably indifferent to the fact that many consumers are routinely being quoted savings of £100 or £200 more than they would actually achieve. In fact, rather than pause to consider the issue, Ofgem went full steam ahead and required not only energy suppliers to use this method, but also required all accredited energy price comparison sites to use the Personal Projection when calculating the customer's current tariff cost.
One of the more surprising parts of Ofgem's response to us was this.
"Calculating savings based on our personal projection method is absolutely not misselling."
"Furthermore, the personal projection is not inherently biased towards overstating savings available from switching."
Given that, in the vast majority of cases, the Standard Variable Tariff (to which the customer is assumed to move after their tariff end date) is more expensive than the customer's current fixed tariff, then the Maths does not agree with Ofgem.
Update note; February 2018
Ofgem appears to have eventually realised what everybody else knew - that Standard Variable Tariffs are expensive and poor value for money. Indeed Ofgem are now actively pushing energy suppliers to do more to get consumers off of poor value Standard Variable Tariffs and government is proposing to cap these tariffs precisely for the reason that they are expensive.
This is taken from the following Ofgem report
Standard variable tariffs: Latest trends at September 2017
Published 20 December 2017
"an average of the ten suppliers' SVT tariffs are around £300 or more above the cheapest overall tariff on the market (£806) and the cheapest variable tariff (£827) available on the market in the analysed period. This difference has persisted since the Competition and Markets Authority investigated the energy market in 2015.
"While most SVTs offer poor value compared to suppliers' cheapest deals, they also offer poor value on a standalone basis."
It follows, beyond any reasonable doubt, that Ofgem have, by their own admission, created an approach that systematically misleads consumers with fake and exaggerated savings.
In July 2015 we devised an alternative approach which was mathematically robust and accurate, showed actual true savings to customers, could be universally adopted across comparison sites and energy suppliers, had no inherent bias and was both intuitive and easy to understand. Surely, Ofgem would listen. Regrettably not.
We did however notice something in the small print of the letters that Ofgem wrote back to us.
"...the Confidence Code does not require sites to provide a savings figure. This can be included at the sites' discretion"
So it would appear that, even though Ofgem introduced the approach, and expects all comparison sites to use the Personal Projection as the default methodology for calculating the estimated costs of a tariff, discretion on how to calculate and show savings is down to the individual comparison website. And, as we discussed in our previous research, comparison sites seem to have been only too eager to adopt the Ofgem approach. Why? Call us cynical but since higher savings lead to more switches and more switches lead to more switching commission maybe it was all about the money.
In this report we undertake research on 13 price comparison websites to see how savings quotes compare with actual savings from switching.
We put together a range of estimates on how many consumers are being affected by the "fake savings" approach and by how much, in aggregate, they may be affected.
Finally, we re-iterate our call for a range of actions from consumers, regulators and politicians to put an end to this damaging and mis-leading practise.
Campaign to stop fake and mis-leading comparisons
Support our campaign to stop this dodgy and mis-leading practise.
If you have been misled by an energy comparison site that quoted you a saving way above what you actually received you may be entitled to compensation. Get in touch, tell us about your experience and we will see what we can do to help.
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