Love it or hate it, retailers know the energy price cap is here to stay for now – and that’s something that most of their customers appear to be pleased about.
According to an exclusive survey carried out by Harris Interactive on behalf of Utility Week into consumer attitudes about energy pricing, the price cap and switching, and an overwhelming majority agreed or strongly agreed that a limit on typical standard variable tariffs (SVTs) should remain in place.
The temporary price cap was brought into effect earlier this year in response to a public and political clamour about “rip-off” energy bills. Its aim is to ensure customers pay a fairer price for their gas and electricity, and although it’s not what many retailers want to hear, the public supports it.
Before the cap – which is expected into last until 2020 – even made its entrance in the volatile energy marketplace on 1 January, set by Ofgem at £1,137 for dual fuel customers, it was cited as a key factor behind the sudden collapse of the proposed mega-merger between SSE’s retail arm and Npower.
And during its first six months in the spotlight, controversy has refused to go away. British Gas owner Centrica has applied for a judicial review into how the cap is calculated; a clutch of small suppliers have gone to the wall; and the limit has already been raised in response to rising wholesale costs. It now stands at £1,254, for a typical customer depending on usage, a potential rise in bills of £117 a year for customers affected.
The survey
Yet despite its wider PR issues, our Harris Interactive survey found almost seven in ten people believed it had been necessary to introduce the energy price cap, with a similar number stating that it should stay. At the same time, however, only one-third thought the price cap had actually lowered their energy bills. Two-thirds either disagreed or were ambivalent (see “Attitudes towards the price cap”), potentially reflecting some consumer confusion around the policy and a lack of knowledge about cheaper deals on the market.
The snap poll, conducted between 28 and 29 March this year (after February’s announcement that the price limit on energy bills had been revised upwards with effect from 1 April), aimed to:
- fully understand the levels of awareness around the cap;
- discover consumer attitudes toward the change;
- gauge its effect and potential future impact on people switching suppliers.
Awareness
Asked if they were aware that an energy price cap was in place, a large majority (68 per cent) answered yes, compared with 22 per cent who said no. Awareness was significantly higher among men and the over-55s (see “Energy price cap awareness”).
When invited to say in their own words what they thought the price cap meant for them, respondents understood it to be a maximum amount they would pay for their energy each month – something seen in a positive light by many.
Comments included “a cap on the price customers can be charged for a product”, and that “energy companies cannot charge extortionate rates to the customers”
In terms of attitudes towards the cap itself, 68 per cent of respondents agreed the government’s price fix should stay, with a similar number feeling it had been necessary to bring it in. Only three per cent strongly disagreed with its introduction.
But the jury remained out on whether the initiative had resulted in fairer energy prices. Less than one-third (31 per cent) agreed or strongly agreed, with 23 per cent disagreeing, of which 9 per cent strongly disagreed. A clear third of all respondents (at 33 per cent) neither agreed nor disagreed.
Switching suppliers
Asked which of the following statements most applied to them, over two-fifths of respondents (44 per cent) said they did not intend to switch energy supplier any time soon. And those who had switched recently said this was not because of the price cap.
Only 7 per cent blamed the cap for them switching, with a further 12 per cent citing it as the reason they intended to do so soon. Those who were planning to switch because of the price cap were more likely to be younger (see “Recent switching behaviour”)
Most of those who had switched supplier had opted to move from a big six company, with the largest number of them coming from British Gas. However, among those switching from a big six supplier there were no significant differences between those switching for price cap or non-price cap reasons, at 64 per cent and 59 per cent respectively [see “Energy companies switched from”)
A sizeable number of switchers moved to a medium-sized retailer, with Bulb Energy and Ovo Energy benefiting the most.
Price cap switchers were less likely to have switched to a smaller supplier (at 12 per cent) and more likely to have switched to a large supplier (46 per cent), although not significantly so (with 42 per cent switching to medium suppliers).
Among those switching to a small supplier, no single supplier stood out. Those switching to one of the big six, respondents were more likely to have switched to British Gas or EDF Energy (see “Energy companies switched to”)
Most of those respondents who said they planned to switch were with a big six supplier. There was little significant difference between whether they blamed the price cap (72 per cent) or not (66 per cent), however those planning to switch due to the price cap were much less likely (at 4 per cent) to be with small suppliers (see “Current energy company planned switchers”).
Asked which energy company they planned to switch to, significantly more price cap “planned switchers” were sure about who they would be switching to, with more saying they would choose a big six company.
Key findings:
- Levels of awareness regarding the energy price cap are relatively high, at almost seven in ten.
- Most understood the price cap was a limit on energy supplier charges and saw this as a positive thing.
- Almost seven in ten thought the cap should stay, with a similar number viewing it as necessary.
- Despite respondents seeing it as a positive step, just over three in ten felt it had led to them receiving fairer energy pricing.
- Most had not – and had no intention of – switching supplier.
- The majority who had or intended to switch said it was not because of the cap.
- Those who had switched or planned to were more likely to be switching from a big six supplier, but as likely to have switched to a medium supplier as one of the big six.
- Those influenced by the cap were much less likely than those who weren’t to have switched to a small supplier and much more likely to have switched to the big six.
- Significantly more price cap planned switchers than non-price cap switchers were sure about who they would be switching to and significantly more would be choosing a big six supplier.