Written evidence submitted byuSwitch.com (EPW0007)

1. The role of energy price comparison sites

1.1.            We welcome the Committee’s inquiry and believe it provides an opportunity to recognise the important role that price comparison websites (PCWs) play to help educate and enable customers to engage in the domestic energy market.

1.2.            uSwitch.com is a price comparison and switching service. We have been helping consumers to save money on household bills for 15 years and in 2014 saved our customers £143 million on their energy bills.

1.3.            We provide consumers with a simple, free and impartial way to compare and switch energy tariff in a market that is criticised for being complex and hard to access. We believe that independence, simplicity, accuracy and reliability are core characteristics that allow us to help consumers engage in the market.

1.4.            Our aim is to offer a free, simple service that allows customers to engage in the market by providing tools to compare numerous offers from suppliers and help them find the right deal for their needs. Most of our customers make significant savings; recent figures show that the average saving of a uSwitch customer switching energy tariff is now £228 a year, up from £138 in May 2012 and £170 in May 2011.[1] Some, notably those who have not switched for some time, are now saving in excess of £400 annually.

1.5.            Comparison websites last year became the most popular method for people to switch energy provider.[2] As a result, sites like uSwitch are playing a crucial and significant role in stimulating competition. This is enabling new, smaller providers to break the dominance of the big six energy companies, driving down prices and improving customer service. PCWs provide new entrants with a cost-effective route to market that puts their brand in front of thousands of customers per day. Currently, well over half of the switches we carry out on behalf of customers are to suppliers outside the big six. These new providers make up around nine per cent of the overall market, up from just two per cent in early 2012[3], and this strong growth - fuelled by PCWs - is expected to continue this year.

1.6.            uSwitch offers customers a comprehensive and free market research tool to easily compare and review their current deal with other providers in the market. A significant number of customers use us for research only and then go direct to the energy supplier to switch, at no benefit to the PCW. This is a valuable tool for consumers and even more valuable to energy suppliers as a route to market, to engage and attract customers.

2. Commission

2.1.            Our website is completely free to use and the majority of customers visit us to simply compare prices and gather information. We receive a commission from energy suppliers with whom we have an agreement if a customer decides to complete a switch using our service. We handle the process on the customer’s behalf to make the transfer seamless and hassle-free.

2.2.            Commission allows us to exist as a business offering customers a free and easy way to compare tariffs, switch provider and save money on their energy bills. It also enables us to continually invest in improving our service, including funding our UK based call centre, which provides free advice and support to those unable to go online - helping those in greatest need save money on their bills. We also offer a free ‘Send Us Your Bill’ service, where a customer can send us a copy of their latest energy bill for us to extract the relevant information and run an accurate comparison. This helps to overcome a major barrier to engagement - that of confusing energy bills. In addition, we regularly attend community events and provide educational support to help consumers tackle rising energy costs. We also publish and keep updated a wealth of educational content, including 150 different guides, on our website to help consumers with issues from energy efficiency to how to read a meter. We continually test our website with customers and make adjustments to the site to ensure our service continues to be as simple to use as possible.

2.3.            PCWs are one way in which energy companies acquire customers and so expenditure on commission forms a part of their sales and marketing budgets. Acquiring customers through a PCW is an efficient and effective way for suppliers to gain market share.

2.4.            The amount of commission received has no bearing on the cost the customer will pay; the price of an energy tariff is exactly the same whether they sign up for it through a PCW or go to the supplier direct. In addition, our results tables are always ordered by the savings a customer can make and commission rates do not factor into the ranking of this information.

2.5.            As commissions have no impact on the ranking of our results table, we believe there is no benefit to the consumer of displaying information about the amount of commission as part of the switching process. We agree completely with Ofgem’s stance that the size of commission is irrelevant to customers.[4] We aim to present information to consumers in a simple, easy to access way, and so would be concerned that the addition of information that does not help the consumer may add unnecessary complication and confusion.

2.6.            In addition, there is no requirement in any other industry for PCWs to display commission rates, nor are energy suppliers required to reveal any of their other sales and marketing costs, such as advertising, pay-per-click or call centre commissions.

2.7.            We provide very clear and easy-to-access information on our website about how our service is funded. We have help text both on our homepage and results page under the title “How we make money”, which includes a list of all suppliers with whom we have a commercial relationship in place.

3. Whole of market comparison

3.1.            As part of the user journey on our website, customers have the clear option to either compare the plans that we can switch them to (i.e. those suppliers with whom we have a commercial relationship) or compare all plans (including those which we cannot switch them to) across the whole energy market.

3.2.            We do not pre-select a default answer when presenting consumers with this choice; nor do we influence what they should select. There is clear explanatory text next to this question, displayed to all users, which explains simply the impact of the options in more detail. This allows customers to make an informed choice about looking at the whole market, or focusing on the suppliers which we can help them switch to using our switching service. Our results tables are always ordered by the savings a customer can make in a fair, independent and unbiased way. As a member of the Confidence Code, our processes are fully accredited by Ofgem.

3.3.            We regularly publish details of energy tariffs across the whole market in our ‘best buy’ tables issued regularly to the media and on the free guide pages on our website.

3.4.            It should be noted that energy prices differ widely by energy region and the cheapest deal will be fully dependent on a customer’s personal circumstances. Therefore there is no single, universal, “cheapest deal”. We advise consumers to run a full comparison based on their individual circumstances to find the best deal for them.

4. Regulation and oversight of energy PCWs

4.1.            Sites like ours are subject to regulation through the contractual agreements we have with the larger energy suppliers. These agreements require us to ensure the supplier complies with their license conditions.

4.2.            In addition, we are a founding member of Ofgem’s Confidence Code and are fully accredited by the scheme, meaning that consumers can be assured that they can compare tariffs in a transparent, fair, independent and unbiased way. We believe strongly that the Code provides an excellent framework for impartial comparison which has protected consumers throughout the last decade, as well as giving much-needed trust and confidence to consumers to engage with the energy market.

4.3.            We have been calling for some time for all PCWs and collective switching schemes should comply with the Code. We believe this will mean others in the sector operate to the same high standards, maintaining consumer trust in energy PCWs and other third party intermediaries. Consumers using services that are not accredited do not benefit from the same level of protection as those using accredited services like uSwitch. It is vital that all organisations meet the same standards of accuracy and impartiality as those PCWs that are Confidence Code accredited in order to maintain trust in the industry.

4.4.            Collective switching schemes are not currently required to obtain Code accreditation. Whilst they have helped some consumers to engage, the single tariff offered will not always be in the best interests of the individual. Consumers have not always had the option of a whole of market comparison and are often offered only one deal - which, as each customer’s needs are different, means that in many cases there could be a better tariff on offer in the market.

4.5.            We believe that the Code should be extended to all activity, including telesales and face-to-face sales. This would allow more vulnerable and hard-to-reach consumers to benefit from the high standards set by the Code.

4.6.            We believe strongly that the Code must continue to evolve so it remains fit for purpose as the industry moves forward. There are a number of upcoming developments such as midata, QR codes, smart meters and time-of-use tariffs that requires the Code to be flexible to allow PCWs to adapt to market changes and continue to innovate in the services they offer. We continue to work with Ofgem to shape future changes of the Code to make sure it continues to offer a high standard of consumer protection.

January 2015