Gas prices are set to rise by up to 22% in October as world prices soar. Comparing prices is now as confusing as chosing a mobile telephone tariff. Tina Leonard examines the small print
Price wars have broken out between energy companies, but comparing prices has become far too complex, so can we trust energy price comparison web sites to do the job for us?
And if you’re prompted to switch suppliers by a salesperson that comes to your door, how do you make sure you are not being pressured into a contract that is no good for you?
At last - competition in the energy market
Thanks to EU legislation Europe’s energy market has been de-regulated since 2007, meaning a choice for us with regard to who supplies our gas and electricity. It took a while here for more service suppliers to come on board but since 2009 over 40% of customers have switched, which is one of the highest switching rates in Europe.
But it wasn’t until April this year that the electricity market in Ireland became fully de-regulated when the ESB (now Electric Ireland), became free to compete on prices. Full de-regulation in the gas supply market has yet to occur.
The European Commission is now working on developing a single market for Energy in Europe with new legislation passed in 2011.
Currently in Ireland, private Irish customers can choose between Electric Ireland, Bord Gais Energy, Airtricity and Flogas.
Why being able to switch is so important
Allowing competition into any market means that prices should come down and service improve as businesses compete for our custom, so being able to choose your provider is crucial.
The biggest way you can win is on price. We saw this immediately when the market was de-regulated with Airtricity and Bord Gais offering tariffs at 12% and 14% below the then regulated charges of the ESB.
But prices change all the time. For example gas prices to Irish consumers fell in 2009 and 2010 as world gas prices dropped in 2008. But wholesale gas prices have doubled in the last two years and as Ireland buys nearly all its gas from external markets we have no control over it.
This has allowed the Commission for Energey Regulation (CER) who still regulate Bord Gais’s prices, to allow them to increase their tariffs in the region of 22% (exact % to be decided at the end of this month), from October.
Unless you’ve locked yourself in to a 12-month contract for example, you should be reviewing your bills and switching to better deals all the time. After all the company that was offering you the best deal last year might not have the best prices this year.
But since full deregulation in the electricity market this year, price comparison has become a minefield.
Last year and before, I was able to easily work out what the best deals for gas and electricity were. But not anymore; it is too complex.
There are too many different pricing tiers: day and night rates; urban and rural rates; different rates depending how you pay or get your bill; the unit rate may be cheaper on one deal but the standing charge dearer for example, there are combined electricity and gas deals and how smart they are for you will depend on how much of each you use. So it is very difficult to work out which deal is best for you.
Price comparison sites
This is where price comparison sites can come in handy. But how do you if a particular site is up to date, impartial, transparent and covers all available options?
You don’t. This is why in a very positive move this week CER launched a system for accrediting websites that compare energy prices. Only websites that meet their standards will be accredited, and they will audit accredited websites regularly.
Standards relate to, among other things: independence and impartiality, inclusion of all tariffs, accuracy and frequency of tariff updates and website filter options with a reasonable set of criteria for consumers so tariff results can be filtered.
Websites can apply for accreditation for a fee of €254, so we should all keep our eyes open for announcements and only use those sites whose standards are deemed good enough.
(Current sites include bonkers.ie, moneyguideireland.ie, freetocompare.ie.)
A big part in some companies’ campaign to get customers to switch to them, is sending salespeople to your door trying to get you to switch.
And you must never allow yourself to be pressured into switching.
UK wants end to door-step sales
The Trading Standards Institute in the UK are actually lobbying for a ban on energy doorstep selling. Why? Because they have heard too many complaints where vulnerable people are cornered in their own home into switching energy suppliers against their will or better judgement.
They cite complaints about customers receiving higher bills after switching despite being promised savings, difficulties in cancelling and being duped into signing something not realising their signature was authorising the company to sign them up to their service.
Last month UK MPs from the Energy and Climate Change Committee said that energy companies should compensate customers for mis-sold deals and said that there is organised confusion, pressure selling and misleading information. No market should be allowed operate like that.
What’s more, in July Scottish and Southern Energy took the decision to abandon door-to-door selling citing a breakdown in confidence among consumers. But this was two months after the company was found guilty of misleading potential consumers at the door. (Case taken by Surrey County Council and the decision is currently under appeal).
So is the same happening here?
The CER say they have not identified any evidence of a systematic approach to misleading doorstep selling, as happened in the UK.
However, they have received complaints relating to repeat callers to the door, lack of clarity in information provided when signing up, incorrect information being provided and inappropriate pressure.
All complaints are investigated on a case-by-case basis and levels monitored.
New guidelines on door-to-door selling
Having said that, according to CER research published this year, one in eight householders feel that pressure to sign up to a new energy provider by door-to-door salespeople has been unreasonable.
So, CER are planning new rules on door-to-door energy selling. It will include a checklist that will describe how sellers should behave and details on information that all householders should be presented with and confirm they understand, before selling can begin.
CER are launching a public consultation process on reviews of all their Codes of practice (including the code on marketing, which includes door-to-door sales) within the next two weeks. Within a period of about two months from now, the new Code will become a requirement.
Keep your eye on what’s happening at www.energycustomers.ie
In the meantime
Tips if you receive the knock at the door
1. There is legislation governing unfair commercial practices, and this means pressurized or aggressive selling, and misleading selling is outlawed. Remember that.
2. There is also legislation governing doorstep selling that gives you a right to withdraw from the contract after signing. This is a seven-day cooling off period, where you can write to the company to opt-out of the contract you have just signed, for any reason. Some companies offer a longer cooling-off period, so make sure you ask what that is.
3. This means if you do sign up you can always change your mind. But a better approach is to take the information if you are interested in it, and take the time to think it over while using comparison sites to do your own research.
4. Ask for ID and make sure you know what company the salesperson is representing. And remember most work on a commission basis.
5. All energy suppliers have more than one deal so make sure the seller is telling you about the best deal for you i.e. the best one to suit your particular needs.
6. Given that your energy usage patterns and needs will dictate what the best deal for you is, make sure you are asked: who is your current supplier and what price plan are you on? How much do you spend on gas/electricity a year? How do you want to pay you bills?
7. Ask about the standing charge, as some tariffs with lower unit rates may have higher standing charges. This information should be provided to you under CER’s code of conduct.
8. Ask if the deal has minimum contract term and an exit penalty.