Energy savings that disappear

Money Box

BBC

Business

4.2 • 825 Ratings

🗓️ 19 November 2016

⏱️ 25 minutes

🔗️ Recording | iTunes | RSS

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Summary

The savings that energy companies promise customers are in many cases fictional and never will materialise. Those are the findings of a Money Box investigation. We found that the savings energy companies have been quoting to urge large numbers of customers to switch tariffs are phantom and can never be achieved. We have discovered that this is down to the way that Ofgem makes suppliers and comparison websites work out potential savings using the standard variable tariff as a basis for comparison even though customers may not even be on it.

This week the Financial Conduct Authority outlined a new approach for regulating the promotion and distribution of Lifetime ISAs which will be available from April 2017. LISAs are intended to allow people aged under-40 to save for a home and retirement simultaneously with a cash bonus worth up to £1,000 a year being added to every £4,000 saved in to the scheme. Lifetime ISAs have come under criticism from the industry so will this new approach make any difference?

As of next spring the UK will have a new main measure of inflation. The Consumer Price Inflation including Housing (CPIH) includes the costs of owner-occupied housing. We discuss its pros and cons.

And Sweden's central bank is currently considering launching a digital currency in a move away from hard cash. We ask the bank's Deputy Governor how a central bank supported digital currency could work and what challenges it would create.

Presenter: Paul Lewis Reporter: Michael Robinson Producer: Alex Lewis Editor: Andrew Smith.

Transcript

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0:00.0	Welcome to the download of Moneybox, which was first broadcast on the 19th of November 2016,
0:05.4	and welcome Lisa, CPIH, the E-Kroner, and those phantoms haunting your energy bills.
0:12.7	Hello, in today's program, the savings promised by energy suppliers on your bill if you switch
0:17.5	tariffs are simply wrong. In some cases, the methodology could even produce
0:22.9	results where you could be out of pocket by switching. And the industry knows it, but the regulator
0:28.6	tells them to give us misleading figures. There'll be a new official measure of inflation from
0:33.5	March, but it's already causing controversy. And the Swedish central bank could be the first
0:38.7	in Europe to have an official digital currency, the E-Krona. But first, if your last energy bill came
0:45.6	with a recommendation to take up another tariff, beware. The accompanying savings forecast may be
0:51.1	an overestimate. And in fact, if you do switch, you may save nothing at all,
0:55.0	or, as we just heard, even lose money. That's the key finding of Michael Robinson's latest
0:59.8	report on the energy market. Take the microphone, Michael. Thanks, Paul. And to be honest, I could
1:04.8	hardly believe it. But for the past two years plus, energy companies have been offering
1:09.7	customers' savings for switching tariffs,
1:12.5	many of which are simply not real. So if people do switch, part of the saving, and in some
1:17.5	cases all of it vanishes. So we're calling it a phantom saving. And who's getting these
1:23.2	phantom savings offers? Well, it's about a third of all households. People who've already
1:28.8	switched away from a standard variable tariff, the usually very expensive charge energy companies
1:33.7	apply to customers who never or rarely switch. So they're typically people on a one-year fixed
1:39.0	tariff and a price a lot lower than their suppliers' SVT. Now, energy companies are required by the regulator to offer
1:47.6	customers their best available tariff, and in doing that, of course, they hope to persuade people
1:52.2	to stay with them. And alongside those offers, there's always a prediction of how much cheaper the new
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