How Fake Savings affect consumers?
We provided a fairly detailed assessment of how many customers might be affected by fake savings in our report of February 2015 which you can read here. We see no reason at this stage to change that assessment. A summary of our view is provided below.
Using Ofgem's Personal Projection to calculate the cost of a current tariff will not affect the savings quoted for customers on either Standard variable tariffs (approximately 60% of consumers) or energy tariffs with an end date greater than 12 months at the time of comparison (a very small percentage).
It will affect any customer on a tariff with less than 12 months to expiry. We estimate that 80-90% of all potentially affected customers fall into this category since most switching has been, and continues to be, to discounted fixed tariffs and these are invariably fixed term tariffs with a product life of 15 months or less. If you have switched before, chances are your savings quote will be exaggerated when you do a comparison.
Consumers using comparison sites are likely to dis-proportionately affected. Price comparison sites tend to get a lot of repeat switchers as well as consumers looking to check for deals as they come close to their tariff end date. We can easily envisage a scenario where over 50% of users of energy price comparison sites see inflated fake savings quotes.
Our estimate of the overall impact on consumers is shown in the Table below where we consider 3 possible scenarios. We appreciate that these are only estimates. However it is easy to envisage a scenario where over 500,000 switchers will have been affected and influenced by exaggerated fake saving quotes on price comparison websites. The aggregate effect of this savings inflation could easily be in the region of £50m to £100m annually - savings that consumers will never see reflected on their bills or on their bank statements.
|Switchers quoted an inflated |
|Savings exaggerated by...||£100||£150||£200|
|Overall savings "inflation"||£36m||£81m||£144m|
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.
Click here to continue reading