Why you need to shop around for energy deals
CONSUMERS should shop around for lower energy prices – and stop waiting for others to take action on their behalf, says a Huddersfield economist.
Kevin Rowles, a senior economics lecturer at the University of Huddersfield, said any move by the government to cap energy tariffs would be fraught with problems.
“Over the years, switching energy suppliers has become easier and the companies have to supply information about competing tariffs,” he said.
“Consumers may simply be unwilling to investigate alternative offers and indeed may be inclined to wait for others to take action on their behalf. As consumers, we need to take some responsibility for our actions.”
His comments follow a letter from 76 Conservative MPs urging Prime Minister Theresa May to cap energy prices for 15m households on standard variable tariffs which they claim are being “preyed on” by the big six energy firms.
Mr Rowles said industry regulator Ofgem had set a cap reducing tariffs for about 4m households using pre-payment meters – often the poorest households.
“In the election campaign, Mrs May promised to introduce a cap on ‘unfair’ price rises to help families on the standard variable tariffs,” he added. “This was part of the desire to assist ‘the just about managing.’
“Typically, customers paying a standard tariff are those who do not shop around or use the price comparison websites.”
Mr Rowles said Ofgem had argued that the government would need to legislate to widen the scope of any price cap – or face possible legal action from suppliers to protect their commercial interests.
While the government might seek to help consumers at a time of falling incomes, it also needed investment in the energy sector to safeguard supplies in the future and promote energy efficiency to meet climate change goals.
“The government itself has contributed to the rise in energy prices through various environmental programmes that have been met by raising energy tariffs,” he said.
Mr Rowles said: “Energy prices in Britain are not high by European standards, which would suggest that a wider cap will be paid for by higher tariffs for those consumers who shop around.
“It is also the case that there are other industries where loyalty to a particular supplier is not rewarded. Insurance, financial services and even supermarkets give the best deals to those customers who are prepared to take their business elsewhere.”
And he warned that interference in free markets “usually comes at a price”.
“Whilst some protections for the most vulnerable consumers such as those on pre-payment meters may be justified on distribution grounds, wider interference must be treated more carefully to ensure that costs do not occur elsewhere in the economy.”