Energy Prices

Debate between John Penrose and David Nuttall

Thursday 16th March 2017 Commons Chamber

[John Penrose (Weston-super-Mare) (Con)]

I beg to move,

That this House deplores the big six energy firms’ treatment of out-of-contract energy customers on default tariffs; believes immediate action is needed to protect those consumers, and that pushing customers to start switching will not fix the problem sufficiently quickly or completely on its own; and calls on the industry, regulators and the Government to consider solutions which recognise that many people lead busy lives and that switching their energy supplier may not always be a high priority.

I thank the Backbench Business Committee for finding the time for us to debate this important and topical motion today. I also thank my two co-sponsors, the right hon. Member for Don Valley (Caroline Flint) and the hon. Member for North Ayrshire and Arran (Patricia Gibson), and the 50 or so MPs from across the political spectrum who all feel that the treatment of most energy customers is sufficiently outrageous and unjust to merit raising it here, in the mother of all Parliaments.

Most industries believe that customer loyalty is hugely important; an asset to be prized. Most businesses reward their most loyal customers with special treatment to keep them coming back—whether it is a supermarket’s loyalty card, an airline’s air miles scheme or just the coffee card that gives you a free cuppa after it has been stamped 10 times. Energy is an exception. What other industry does not give its most loyal customers any discounts or special deals, but instead charges them higher prices than anyone else? Which companies believe that loyalty should be exploited, not rewarded? Which one of them treats their longest-serving customers as chumps, to be quietly and secretively switched on to expensive, unfair deals when they are not looking, and then milked—ripped off mercilessly for as long as possible? The answer is the big six energy firms. The rest of the energy industry is pretty good. There are 30 or more newish energy firms snapping at the heels of the big six, and they understand that customer loyalty matters if they want to grow.

[Mr David Nuttall (Bury North) (Con)]

As my hon. Friend will know, there has been a huge roll-out of smart meters, which is one way of people keeping an eye on their energy bills. Unfortunately, though, when people do switch providers, they find that their smart meter has to be replaced at the same time. Does he agree that that is one reason why perhaps some people are becoming unwilling to change providers?

[John Penrose]

There are many reasons why switching has not caught on to anything like the degree that we need it to if we are to transform the sector. I understand that one factor may very well be this problem with the introduction of smart meters, but there are others, too. My hon. Friend was quite right to point that issue out, and I will mention some others later on in my speech.

As I said, there are 30 or more newish energy firms snapping at the heels of the big six, and they understand that loyalty matters. Obviously, some are more impressive than others, but they all have one thing in common: they are hungry. They know they have to impress and delight their clients, because they cannot rely on exploiting a “back book” of long-term customers to stay fat and happy. The figures are stark. Roughly two thirds of all customers—at least 20 million households—are on the expensive, rip-off deals: the standard variable tariff. A minority of customers switch to a different energy supplier regularly, but most of us do not. The amount of switching has been creeping upwards, but much of the change has come from the same bargain hunters churning round and round in ever faster circles between different energy firms. The number of households that have rarely or never switched remains stubbornly high, which suits the big six just fine. So, what is the answer? How do we put energy customers in the driving seat? Do we give them the same power to choose a new supplier as easily as we switch to a different brand of toothpaste or coffee? How do we make them compete to delight us, rather than quietly exploiting us?

First, we have to make switching a lot easier. Choosing that different brand of toothpaste in a supermarket is easy: we just pick a different tube off the shelf. Too many people find switching to a different energy firm scary and stressful, and are frightened off as a result. Even the price comparison sites, which have an interest in making the process as simple and as easy as possible, say that huge numbers of customers abandon their search when they are asked a basic, essential question such as what is their current energy usage. Others think that switching is likely to go wrong, and that they might end up cold and shivering in a home without power if the move does not happen smoothly.

My hon. Friend the Member for Bury North (Mr Nuttall) has already mentioned the impact on some households of the new smart meters. Others simply have not got the time to switch. Many of us lead busy lives, juggling careers, childcare, school runs and goodness knows what else. Switching our energy supplier can easily become one of those things that we all know we should do, like washing the car or joining a gym, but we never quite get round to doing. The difference is that other products do not automatically switch us to a super-expensive brand of toothpaste or coffee unless we tell them not to. They do not expect us to be on our toes all the time to stop them changing the terms of our deal and ripping us off when we are not looking. For toothpaste, coffee and almost everything else, loyalty and inertia work in the customer’s favour; they are on our side. That does not apply to energy. If we relax, they will have us.

Fortunately, there are some simple things that make switching easier, less stressful, simpler and not so scary. The main one is making our customer data easily available to a new energy firm if we give them our permission. That way we do not have to fill in endless online pages with information that we cannot remember or that we have not got. At the moment, the information can take days to come through, and the big six throw all sorts of obstacles in the way. They have no interest in making it easy or simple.

In future, we should just be able to ask our new firm to get it from our existing supplier in a few seconds, with a click of a mouse or a tick of a box—simple, quick, easy and safe. The number of people switching will go through the roof if we do that.