With the news that price comparison websites are hiding the best deals from consumers, we ask:
Can you really trust energy cost comparison sites?
The new rules set by Ofgem, (the governments energy regulator), came into force in January 2014. They are designed to simplify UK gas and electricity tariffs. This means that each supplier is limited to four “core” tariffs for each fuel, which is gas or electricity. Some exceptions include the white label tariffs, this means that energy can be sold under the name of other organisations such as supermarkets, or a charity, and some short-term offers for collective switching schemes.
Running alongside the limit on the number of tariffs that can be offered, energy companies are no longer able to offer complex tariffs, In particular they cannot sell tariffs where the unit price drops after an initial number of units have been used. Any front loading has to be identified as a daily standing charge.
With the introduction of the new rules can you trust energy cost comparison sites? Ofgem states that its reforms “should give the consumer a simper, clearer and fairer market that will make it easier for you to understand your energy supply and to choose the best deal”
Millions of us flock to comparison websites to find the best financial products, such as energy tariffs, loans, credit cards etcetera. Several months ago the Financial Services Authority, the UK regulator, published a report on sites that compare insurance. This followed a complaint by the British Insurance Brokers Association, this is a trade body with a vested interest in protecting traditional High Street Brokers. The report by the financial services authority was said to set out some vague guidelines telling websites they need to provide consumers with “clear and fair” information. Brand prominence has been gained by websites such as Uswitch, Money supermarket, Confused. Com, Beathatquote, Go Compare and Money Expert, they use, radio, TV and newspaper advertising campaigns. These sites enable users to compare the price of hundreds of tariffs or quotas in seconds, a job that would usually take several hours. Product providers pay to be included, and there are suggestions that deals that are lucrative for the aggregators are sometimes pushed ahead of “best buy” tables.
British Gas and BT have complained of being unfairly represented on best buy tables because they did not have a commercial agreement with the website. British Gas has allegedly a long running dispute with uSwitch.
In the light of the above information, can you trust energy cost comparison sites? Moneywise state that: “around ten million people use price comparison websites each year in the UK. But not many of us realise that we’re paying around six hundred and fifty million a year in commission for the privilege”. A recent YouGov survey found that consumers thought they paid between 5% and 10% in commission when they bought something through a comparison website-in reality, the average commission is twenty four percent.
Ofgem reports that are plans to change its code, (Ofgem’s Consumer Customer Code), so that customers are able to view all the tariffs, regardless of the commission the website will earn.