How energy price comparison websites exaggerate savings
(or...Has Ofgem just created the next energy mis-selling scandal?)
1. Executive Summary
The Big 6 energy comparison websites, as well as the majority of the accredited energy price comparison websites, exaggerate quoted savings to consumers using a flawed calculation methodology proposed by Ofgem, the energy regulator. A significant proportion of switchers never realise the savings that are quoted on these sites. In our research, savings were "inflated" by between £100 and £200. The level by which savings are "inflated" across the UK is estimated at between £50m to £100m a year. Price comparison websites did not need to follow this "inflated" savings approach - they voluntarily chose to do so. Even Which? and MoneySavingExpert follow these practises. The questions now are:
- Were consumers mis-sold?
- If so, is compensation due and,
- If so, who pays?
(often as noun mis-selling)
Sell (something) to a customer on the basis of misleading advice
An action or event regarded as morally or legally wrong and causing general public outrage
Oxford English Dictionaries (both definitions)
In our research we found that:
Price Comparison Websites
- 12 of the 15 sites surveyed used the "inflated" savings methodology.
- All of the Big 6 energy price comparison websites use the "inflated" savings methodology.
- The vast majority of sites quoted savings that were between £133 and £196 greater than the customer would actually achieve from switching.
Big 6 energy suppliers
- While the "inflated" savings methodology is supposed to apply to energy suppliers through their License Conditions, to our surprise we found that none of the Big 6 follow the "inflated" savings methodology on their websites. Instead 4 of the Big 6 have stopped showing comparative savings altogether. The 2 suppliers that do still offer comparative savings follow a true like-for-like comparison approach.
Smaller energy suppliers
- Behaviour amongst the smaller suppliers varies quite markedly.
- Of the 17 smaller suppliers surveyed, only 7 offered comparative savings on their websites. Of these, 3 follow the true like-for-like approach, whereas 4 follow the "inflated" savings approach.
Joe Malinowski, founder of award winning energy price comparison website TheEnergyShop.com commented.
"This is a potential scandal of quite significant proportions in terms of the number of customers affected, and the extent to which they may have been mis-led".
"Our research shows that "inflated" savings of £150 or more are not uncommon and very large numbers of customers are impacted. Across the UK we estimate that some 500,000 customers will have seen their savings quotes "inflated" by somewhere in the region of £50m to £100m - savings that will never be realised in their bills."
"Many customers will only now be starting to realise that the savings they were quoted last year were wildly "inflated" and their bills are consequently higher than they expected. It will be little comfort for them to learn that this has resulted from an approach proposed by Ofgem; an approach that all of the largest comparison sites seem to have been only too keen to adopt."
"TheEnergyShop.com has never followed the "inflated" savings approach. We believe it to be mis-leading and we don't plan to start using it now."
TheEnergyShop.com is now calling for an immediate suspension of all energy sales activities that use the "inflated" savings approach.
TheEnergyShop.com is calling for a truly independent inquiry, independent of the regulator Ofgem, to investigate the level of consumer detriment that may have been caused, to identify whether compensation is due and, if so, how much and who should pay?
TheEnergyShop.com is urging consumers who may have been adversely affected by an inflated savings quote to initially contact the price comparison website (or energy supplier website) through which they made their switch in order to get a re-quote based on the "true" like for like comparison. This is the first and necessary step to indentify the extent to which consumers have individually been affected before deciding what further action each consumer should take.
Campaign to stop dodgy and mis-leading comparisons
Support our campaign to stop this dodgy and mis-leading practise.
If you feel you've been given an "inflated" saving by a price comparison website or energy supplier we'd like to know about it.
Please drop us a note.
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