UK Energy - Vulnerable Customers Paying More?Published: 11/08/15
Whilst many Utility Companies are sensitive to the needs of vulnerable customers and act appropriately, research in the UK suggests that in some cases such customers may be paying more than they should.
Within the Energy Industry, a vulnerable customer is defined by Ofgem, (the Office of Gas and Energy Markets), by their personal circumstances and characteristics, creating situations which mean they are:
- Significantly less able than a typical consumer to protect or represent their interests in the energy market.
- Significantly more likely than a typical consumer to suffer detriment, or that detriment is likely to be more substantial.
Families on a low income and the elderly are more at risk of overpaying for energy, research within the United Kingdom suggests. Research by Save The Children and investigations by the Competition and Markets Authority (CMA) outline that vulnerable and susceptible groups may pay more because they lack access to technology such as the internet. This research also indicates that often they cannot get the best deals from price comparison websites meaning that they cannot take advantage of the most competitive tariffs available.
Why Are Vulnerable Customers Paying More?
According to the Centre for Sustainable Energy (CSE), families on low incomes are concerned that if they switch from their current energy provider, they will be subjected to unexpected costs that they cannot afford. The CMA recently said within their investigation findings that 95% of dual-fuel customers are on a standard variable tariff, which suggests that they are not getting the cheapest deal possible for their energy use. Vulnerable customers are potentially overpaying for their energy because they are not switching to the cheapest tariff available, over fears of paying more than usual.
What is Being Done to Make Customers More Aware of the Benefits of Switching?
Citizens Advice, an independent charity that gives free information and advice, runs a programme which encourages and reinforces switching within the energy market. This informs consumers as to how they could reduce their energy costs. Whilst the CMA has reported some positive results in engaging consumers within the market, the investigation has drawn attention to the perpetual ongoing matter that some customers remain remarkably unlikely to ever switch energy suppliers. The energy market in which these groups of consumers operate therefore lacks competitive pressure and prices remain higher on average.
There are currently more than 400 different various energy tariffs available for UK customers. Ofgem are actively encouraging energy companies to simplify and reduce their tariffs so that it is easier for customers to identify the best energy deal available. If vulnerable individuals had access to these simplified tariffs, they could potentially be paying less. However, as noted previously, vulnerable customers do not always have access to the internet, where many of the best deals are readily available.
Should It Be Up To Vulnerable Consumers To Find the Best Energy Deal?
Although many customers are paying reasonable prices for their energy, it is clear from the research noted above, that many may be unaware of what the best available deal is. It is very easy for customers to follow what they have always done, but sometimes these traditional ways are not the cheapest. Ethically it could be argued that the energy industry should be doing more to help ensure vulnerable consumer groups find the most cost-effective tariff.
Awareness is the key to change.
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