Personal Projections are so Fake
We set out the background to the Personal Projection in our report of February 2015. It can be read here.
Here we provide a brief overview to set the context for the research.
So what is a Personal Projection?
A personal projection is an estimate of your Estimated Annual (Energy) Costs for the next 12 months based on your current energy usage. It takes into account the standing charges, unit rates and any discounts associated with a tariff and multiples them up by your usage to calculate what you will pay for your energy in the next 12 months. So far, so good.
If you are not changing tariff in the next 12 months, either because you are on an expensive Standard Variable Tariff, or because you are on a long term fixed rate plan, then the Personal Projection is nothing more than the Annual Cost of your current tariff or your future tariff projected forwards for 12 months.
However, if your tariff ends in less than 12 months, perhaps because you are on the remaining few months of a fixed rate deal, then Ofgem requires us to assume that you do nothing at the end of your tariff and that you allow yourself to get moved onto your current supplier's Standard Variable Tariff. We are then required to calculate the costs for the remaining months on your current tariff with the balance of the 12 months calculated using the cost of the Standard Variable Tariff.
By way of example, let's assume that you have switched to a cheap fixed tariff that is costing you £900 a year for your energy, and which ends in exactly 6 months time. At the end of those 6 months we have to assume, rightly or wrongly, that you do nothing and that you will be moved by your supplier to their Standard Variable Tariff. Let;s assume your supplier's Standard Variable Tariff is going to cost you £1,200 a year based on the same usage.
So while you are only paying £900 a year currently, the Personal Projection for your current tariff is calculated to be (£900 * 182.5 days) + (£1,200 * 182.5 days) = £1,050; £150 more than you are actually paying.
So what is the problem?
There are a number of problems with this approach which are listed below. The main one is this.
If you switch from a tariff costing you £900 a year to one costing you £900 a year you save, in cash terms, exactly ZERO a year. We can all agree on that right?
However, if we inflate the cost of your current tariff from £900 to £1050, and then use the inflated Personal Projection figure to calculate your savings, switching to that same £900 tariff suddenly shows you a purely fictitious saving of £150 instead of a REAL saving of £0 (Nothing at all). Fake Savings of £150.
The Personal Projection has lots of other flaws and problems
- Assumptions used (that the user will not switch) are just ridiculous, particularly for users coming to end of their tariffs and using price comparison websites to compare
- The calculation is incomprehensible to the vast majority of consumers
- The calculation is, in any case, inaccurate as it does not take into account seasonality.
But the real damage, as previously mentioned, happens when the Personal Projection is used in a savings calculation. In this case it also;
- Systematically overstates the potential savings from switching, often by significant amounts.
- Creates savings calculations which are purely fictional and are never realised as cash savings for consumers (except in very rare exceptional cases).
- Leads to inconsistent results between price comparison websites, and between price comparison websites and energy suppliers.
- Creates a different calculated result on a daily basis.
- Is mis-leading, creates real consumer harm and damage, and could give rise to mis-selling claims.
- Affects significant numbers of consumers (like 100s of thousands).
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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