Imagine if you saw the following on a leading energy comparison website....
Yes you read that right! You can apparently save £520 a year on an annual average energy bill of only £438
But how can that be?
Is it a scam?
Is it something that only exists in a parallel universe where time and reality are reversed?
The truth is more more disturbing than that.
This is what the leading energy comparison and money saving sites are promising you.
So how can you do it? How can you save more than you spend and so pick up some free cash along the way?
Follow these simple steps to find out.
1. Visit almost any comparison website (full list provided later)
2. Enter postcode, current tariff and supplier details, and your energy usage (profile given below)
3. Hey presto! You get a quote claiming a saving of £520 a year.
The sceptics (or realists) will argue it is not possible. How can you get a saving greater than the actual bill itself? Is the energy supplier actually going to pay me to take their energy?
Indeed those sceptics do have a point because, in the scenario in question, the actual cash saving is...wait for it... only £6.35.
The difference between the two figures is down to some jiggery-pokery by the price comparison sites. Using their algorithms, they take the real cash saving and, by applying a range of complex assumptions and formulas, they arrive at the figure of £520. In a nutshell, the net effect of applying these complicated algorithms, in this particular case, is to take the real saving and multiply it by 82. Put another way, the real saving is inflated by over 8000%.
At the heart of the issue is when the Personal Projection, a concept introduced by Ofgem in March 2014, is used to calculate the customer's current tariff cost (in situations where that tariff has less than 12 months to run) and then used to calculate the savings from switching. In a significant number of cases this leads to customers getting quoted savings that are significantly higher than they actually achieve from the switch.
Our research in February 2015 showed that energy comparison sites were routinely quoting savings £100-£200 greater than customers were actually achieving from switching, and that this was affecting significant numbers of consumers. We considered this to be both mis-leading and mis-sellng. We urged politicians, regulators and competition authorities to ban this dodgy practise. Our calls largely fell on death ears.
A year on we wanted to re-visit our research to see how the picture might have changed. With the cheapest energy tariffs having fallen 3 times as fast as Standard Variable Tariffs (SVT) over the last 2 years we had expected that the level of savings "exaggeration" would have increased. What we found was both disturbing and implausible.
In our research we found that:
Price Comparison Websites
- All 13 of the energy comparison sites analysed (except TheEnergyShop.com) quoted savings that were materially greater than customers would receive.
- In one scenario an actual saving of £197 was quoted, on average, as £536. This is £340 (173%) more than the customer will actually save.
- In the other scenario, an actual saving of £�6.35 was quoted as £492. This is £486 (7646%) more than the customer will save.
- In one scenario all sites (except TheEnergyShop.com) quoted a saving that was even greater than the customer's current energy bill. Clearly an implausible situation.
- Some sites showed savings that were over 8000% more than was achievable.
Joe Malinowski, founder of award winning energy price comparison website TheEnergyShop.com commented.
"When comparison sites start quoting savings that are greater than a customer's annual energy bill, we know that something is really very wrong indeed."
"Saving more than your annual energy spend is both implausible and absurd. By now it should be as clear as day that this approach is both fundamentally flawed and dangerously mis-leading."
"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, each year, 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."
"This simply has to stop. It can lead to poor decisions being made and bad financial outcomes for consumers"
TheEnergyShop.com is again calling for an immediate suspension of all energy sales activities that exaggerate savings to customers.
TheEnergyShop.com is calling for a truly independent inquiry 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 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.
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.