Stopping energy firms offering discounts to specific customers ‘naive’

Offering lowest rates to all could work against consumers, says price comparison expert

Any moves to ban energy companies from offering discounts to new and switching customers would be “naive” and would unfairly target consumers who seek out better value when it comes to utilities, it has been suggested.

A key feature of Ireland’s domestic utility market is that companies offer a standard unit rate for gas or electricity to existing customers with discounts of up to 40 per cent offered to switching customers for an initial 12-month period.

Speaking in the Dáil this week Minister for the Environment and Green Party leader Eamon Ryan suggested utility companies could be required to offer the lowest rates to all customers.

However, Daragh Cassidy of price comparison and switching website bonkers.ie said that could end up working against consumers.

He noted that the even when the Central Bank moved to outlaw so-called price walking – for example, motor insurance firms charging existing customers more every year than new or switching customers – it allowed companies compete for new business by offering discounts for the first year of a new policy.

“With energy there isn’t price walking but there is what the Government has recently legislated for in the insurance industry. Discounts are only on the table for the first year after a switch is made.”

Mr Cassidy suggested it would be “a naive assumption to make that everyone would get the cheapest discounted pries if dual pricing was banned. I don’t think it would be right to say that a company that is offering a discount of 40 per cent to switching customers would offer a 40 per cent discount to all their customers if they could only offer a single price.”

He suggested there was “a delicate balance between protecting vulnerable people and not penalising those who shop around”.

Mr Cassidy also highlighted a potentially serious issue issue for people who have been getting estimated bills from their suppliers.

Problem with an estimate

Both ESB Networks and Gas Networks Ireland attempt to read households' electricity and gas meters once every few months to gauge how much energy has been used. But between readings, or if they can't access the meter, an estimate is used.

A report last year from the Commission for Regulation of Utilities showed that 52 per cent of electricity customers and 46 per cent of gas customers did not submit a meter reading of their own over the previous 12 months. Customers of Electric Ireland and Bord Gáis Energy are particularly bad at supplying readings, with closer to 60 per cent of these customers not doing so, according to the survey.

Estimates are not always accurate and sometimes suppliers can underestimate usage. When this happens customers will be billed for the units used at a later date, once an actual reading has been carried out and charged at the most up-to-date price.

Mr Cassidy said the problem “in a time of rising prices” is that the bill for the energy you owe will be based on today’s price. It won’t be based on the price of your gas and electricity at the time it was actually consumed and when prices may have been far lower.

“Suppliers have announced price increases of up to 43 per cent over the past few days which will come into effect over the next few weeks. This means households could end up ‘backpaying’ a significant amount for their energy at much higher rates unless they submit an up-to-date meter reading. “

He urged all households to submit a reading to their supplier as soon as possible and certainly before any price increases kick in.