Eon boss: you're a sucker not to switch!
People who don’t switch energy supplier deserve to pay through the nose – that’s the view of the boss of one of Britain’s biggest energy suppliers.
Michael Lewis, chief executive of Eon, which has some 4.6 million customers, told a parliamentary committee, he thought it was right that anyone who doesn’t take the time to switch energy suppliers should pay more.
The Eon boss was appearing before the business select committee. He was asked if he thought it was right that people who said they were too busy to switch should end up paying hundreds of pounds more for their energy.
Michael Lewis 'shop around for the best energy deals'.
Mr Lewis said: "I think it's right that somebody who engages with the market and searches for the product that's right for them gets a better deal than the person that doesn't."
Eon is one of the Big Six energy suppliers that dominate Britain's energy market.
The company has around a 13% share of the residential electricity market and 11% of the gas market.
You may be paying a rip-off tariff without even realising
Most importantly, like the other big energy suppliers, more than two thirds of its customers are on its most expensive standard variable tariff.
This is the rip-off tariff that any customer is put on to when a fixed deal runs out – IF, that is, the customer doesn’t take action and switch to a better deal.
Most people on these tariffs don’t even realise they’re on them
You can usually save around £300-plus a year by switching from the standard tariff to the cheapest fixed price deal on the market.
Even if you stayed with Eon right now, you could save £103 by switching from its standard tariff to its cheapest fixed-price deal.
The government has vowed to end these rip-off tariffs by capping them, which will help around 11 million households.
Many experts, however, take the view that a cap will stifle competition and that switching takes no more than a few minutes.
Either way, capping isn't happening anytime soon.
Switching is the only way to avoid overpaying
Mr Lewis said Eon backed an existing price cap for around four million customers with pre-payment meters, and plans to extend it to at least a million other households.
MPs on the business select committee, which is examining the government's planned price cap, also clashed with Mr Lewis and bosses from Centrica, the owner of British Gas, as well as SSE, Britain's two biggest energy suppliers, over what they were doing to get customers on to better deals.
Rachel Reeves, the committee's chair, repeatedly pulled up Sarwjit Sambhi, managing director of UK Home for Centrica, when he claimed British Gas was ending its standard variable tariff, and that it didn’t have the "opportunity" to remind customers every month to switch.
Ms Reeves warned him to take care with his language, and got him to admit that British Gas was only ending its standard tariff for new customers, not for the millions of existing customers.
Nothing was preventing British Gas from alerting its customers to better deals more often, she said.
Why the Big Six don’t want you to switch …
"I would suggest the reason you don't do that is because you are quite happy to have 69% of your customers on standard variable tariffs because that's where you make your profits," Ms Reeves added.
Mr Sambhi insisted that was not the case and claimed customers would "not appreciate" such frequent contact unless it was part of a monthly billing cycle, although later said he would consider doing so.
Well, what do you think? Does Mr Sambhi really expect anyone to believe him when he says he believes people would get annoyed if they were told how they could save hundreds of pounds a year?
Getting the message that loyalty is for mugs
British Gas’ profits for its residential energy business were £553m in 2016. In 2015, they were £623m.
The company said the fall in its huge profits was partly due to a drop in the number of customers.
That’s because, finally, more people are getting the message that loyalty is a mug’s game – now even the energy bosses themselves confirm it.
Cenrica, the owner of British Gas, reported profits of £1.52bn in 2016.
"The big message is that it's very competitive out there actually," said Iain Conn, chief executive of Centrica.
"We have seen increased metering and other costs coming through. We lost customers in the first half of last year. We are seeing pressure on our margins because there are 50 suppliers out there."
We say – and it’s about time!
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