Making Price Comparisons Easier

Findings from independent research commissioned by energy regulator Ofgem show that many gas and electricity customers still find it difficult to get good quality information about domestic energy prices.

That is why Ofgem has announced today (Wednesday) its commitment to continue to provide comparative pricing information. This is essential for ensuring that customers benefit fully from the competitive gas and electricity markets.

The research study into attitudes to price information showed that customers obtain most of their pricing information from suppliers.

More than 65 per cent of customers interviewed agree that it is confusing to work out how much they would have to pay with a new supplier. The study also showed that Ofgem instilled the most confidence as a source of price information.

Ofgem's Managing Director for Customers and Supply, John Neilson, said: "This research clearly shows that many people do not find it easy to compare the prices of gas and electricity suppliers. It also shows that customers who use Ofgem's comparative pricing information find it very useful.

"That is why we have decided that it is important for us to continue our work in providing this type of information, to ensure that customers are well-informed and confident about making decisions on whether or not to change their gas or electricity supplier.

"If, in the future, energywatch, the new gas and electricity consumer body, wish to agree a date when it can assume responsibility for this work, then we shall arrange a smooth handover to them. In the meantime, we shall continue to provide this most important service ourselves."

Since June 2000, Ofgem has distributed almost 150,000 pricing factsheets to customers - a further 221,500 were downloaded from the Ofgem website between October 2000 and February 2001. Ofgem also recently announced the first two companies to sign up to its voluntary code of practice for companies offering independent price comparison services.

The research also highlighted concerns about the accuracy of an Energy Cost Index (ECI) - a concept Ofgem has been investigating and put forward to groups of consumers for testing. While those surveyed supported the idea of an average cost indicator, they said that the ECI did not help them compare prices, finding it vague and unrepresentative.

John Neilson added: "Given the variety of customer requirements in the gas and electricity markets, any simple and workable ECI would provide unreliable guidance for substantial groups of customers. Ofgem has therefore decided it will not pursue the development of such an indicator. This decision is supported by energywatch."

A National Audit Office (NAO) report published in January stated that domestic electricity customers' bills have fallen by 163750 million a year since competition began, with gas customers' bills falling by 1631 billion a year.

According to the NAO, 6.5 million electricity customers have switched supplier, with 139,000 people switching each week. A similar number of gas customers have switched and they continue to switch at 57,000 a week.

Technical details

• Ofgem asked MORI to conduct qualitative and quantitative research to examine the issues surrounding the comparison of energy prices by domestic customers and the impact on the competitive market. The objectives were to explore the role of, and expectations for, price information; to assess customer reaction to the alternative sources of information available; and suggest and evaluate possible improvements to these sources. MORI conducted 10 group discussions with domestic energy customers across the country between 18 December 2000 and 10 January 2001. It also carried out 1691 face-to-face interviews between 4-8 January 2001.
• Copies of the document 'Making gas and electricity price comparisons easier - a decision document' (19/01) and the MORI report 'Attitudes to Price Information: Qualitative and Quantitative Research' (21/01) are available on the Ofgem website at www.ofgem.gov.uk/public/pub2001.htm or from the distribution centre by telephone: 0116-277 2617 or by email: [email protected] from Friday 16 March. Documents can only be ordered as hard copy or downloaded from the website. Please quote document reference numbers when ordering from the distribution centre.
• Ofgem is the Office of the Gas and Electricity Markets, regulating the gas and electricity industries in Great Britain. Ofgem's aim is to bring choice and value to all gas and electricity customers by promoting competition and regulating monopolies. Ofgem is governed by an authority and its powers are provided for under the Gas Act 1986, the Electricity Act 1989 and the Utilities Act 2000.