The Government should look at new ways of cutting expensive energy bills for those unwilling to switch – including a relative price cap – MPs said today.
In a parliamentary debate about how to prevent households stuck on pricey standard tariffs from overpaying, MPs warned many people still find switching energy supplier "scary and stressful", and branded the big six firms' treatment of loyal customers as "outrageous and unjust".
MPs voted to pass a motion calling for "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". As it was a backbench debate though, there's not likely to be any immediate action as a result of the vote.
'Who treats their longest-serving customers as chumps?'
John Penrose, Conservative MP for Weston-super-Mare and a former minister, led the attack on energy firms, saying: "What other industry doesn't give their most loyal customers any discounts or special deals but charges them higher prices than anyone else instead?
"Who treats their longest-serving customers as chumps to be quietly and secretively switched onto expensive and unfair deals when they aren't looking and then milked, ripped off mercilessly, for as long as possible? The big six energy firms, that's who."
Penrose cited MoneySavingExpert.com's Cheap Energy Club during the debate as an example of how "end-to-end" switching services can play a vital role in encouraging more people to move supplier.
But he said the industry still had "an awfully long way to go" before switching was the norm, with "the same bargain hunters churning around in faster and faster circles" moving between the best deals while two-thirds of households languish on standard tariffs.
To combat this he repeated a call he's made previously for a "relative price cap" to be imposed on suppliers as a temporary stopgap until switching becomes more popular. This would impose a maximum difference between a provider's best deal and its most expensive one.
Relative price cap 'the worst of both worlds'
While a number of MPs supported the idea of a relative price cap in the debate, MoneySavingExpert.com founder Martin Lewis has argued strongly against the proposal.
Last month Martin wrote to The Times newspaper warning that Penrose's plan for a relative price cap would give customers "the worst of both worlds".
He warned: "Some will still overpay, but many firms won't be able to offer really cheap prices – disincentivising people from switching."
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MoneySavers give their views to MPs
Over the past week MoneySavers' views on energy switching have been collated in our forum. These were fed back to MPs ahead of today's debate. You can read and still contribute to the dedicated forum thread here.
Forumites were divided over a possible price cap, with some arguing for and others against. One user wrote: "Energy is a basic commodity and prices should be capped."
But another countered that the measure would "do no favours, as instead of dropping the standard tariff to be nearer the fixes, companies will just make poorer fix offers".
A third reported their own switching success story: "Just switched from SSE this morning using Cheap Energy Club – estimated £347 a year saving."
What does the Government say?
Business Minister Jesse Norman said it was "not acceptable" that five big-six energy suppliers have announced they are hiking standard-tariff prices, but insisted that encouraging switching was the right approach.
He said: "There has been some progress... There are now over 50 energy suppliers in the domestic market – up from 13 in 2010 – and there of course are the potential new entrants including local authorities waiting in the wings."
He said the Government was working hard to make switching energy companies quicker and easier and he hoped to make it possible to switch within 24 hours. "That I think will be a major improvement to our system," he said.
And with regard to the price cap for prepayment meters, which will take effect next month, he stressed that the Government was "determined to go further." He branded current practice unacceptable and vowed to set out proposals to address the issues.
Additional reporting by the Press Association.