Some energy autoswitching services are comparing fewer than 15 out of around 70 possible energy suppliers, despite claiming to cover most of the market. The result is some customers are paying £70 a year more than if they’d found a good deal and switched themselves. This is according to a new report - Stuck in the Middle - from Citizens Advice.
Some autoswitchers were also providing inaccurate or unclear information, making it difficult for consumers to make informed choices about using the service. Some were even listing energy firms who have gone out of business.
Despite poor levels of market coverage and unclear information from some autoswitchers, the charity’s research showed customers of others getting good deals and only paying £5 more than if they’d found the deal themselves.
The first autoswitching service launched in 2016, last year around 300,000 people used these services.
The charity believes the problems uncovered with autoswitchers highlight a wider problem that Third Party Intermediaries (TPI) in the energy market - services like autoswitchers, price comparison websites and other services - are not currently regulated.
The charity is calling on the government to use the upcoming energy white paper to make sure consumer protections are fit for the future and bring them into line with other markets like insurance. A move which has overwhelming public support.
This will be essential as new types of TPIs emerge that will manage smart appliances and electric vehicle charging and have far greater control over aspects of people’s lives. These services will be increasingly important to the UK’s transition to net zero by helping people manage their energy use and helping balance supply and demand to and from the electricity grid.
Lack of regulation leaves people facing serious problems
The current lack of regulation of these energy services means people can face serious problems that are difficult to resolve. Cases seen by Citizens Advice of problems caused by TPIs include:
- Autoswitchers failing to cancel a switch, leaving customers stuck with a supplier they are unhappy with or facing exit fees
- Bill splitting companies failing to pass on communications from suppliers, leaving people in unexpected debt
- Consumers in vulnerable situations losing some of the services they rely on as a result of being switched without warning
Existing protection gaps
If people buy insurance through a price comparison website and things go wrong, there are far greater levels of protection than with energy.
TPIs operating in insurance and other financial services sectors are regulated by the Financial Conduct Authority (FCA). This means people can resolve complaints via an ombudsman, firms are required to treat their customers fairly and vulnerable customers have more protections.
Citizens Advice is calling for the same approach in energy, overseen by Ofgem. The charity believes the approach would ensure a good balance between consumer protections and ongoing innovation.
Overwhelming support for reform
The charity’s research, a combination of workshops with energy customers and national polling, found people are shocked by the lack of regulation and overwhelmingly support reform.
- Nearly 4 in 5 people (79%) say price comparison websites and autoswitchers should have to offer customers a route to an ombudsman to resolve complaints
- A significant majority of people think price comparison websites (73%) and energy autoswitchers (70%) should be regulated
- 60% of people think TPIs should follow rules to make them give clear information on how many suppliers they compare and how they’re funded
Time for regulation
The charity believes reform is well overdue - the Competition and Markets Authority first called for these reforms in 2017 - and urgently needed.
Last year 6.9 million people used a third-party service to compare or switch their energy supplier. The market is set to grow further as the country moves towards net zero.
Dame Gillian Guy, Chief Executive of Citizens Advice, said:
“The lack of regulation leaves people facing potentially serious problems and a lengthy and difficult path to resolving them. As more and more people use these sorts of services it’s essential that better safeguards for customers are put in place now.
“The government has an opportunity in the upcoming energy white paper to fix current problems and make sure the right consumer protections are in place as the UK moves to a zero-carbon future.”