In wider society and in most industries, loyalty is rewarded. You’d think all businesses would be interested in maintaining positive relations with their most reliable customers – a pub is far more likely to allow a regular to buy a drink today and pay for it tomorrow than to allow a new patron to do the same, and supermarkets and other large retailers run loyalty card schemes nowadays to incredible success.
British Gas customers penalised
But British Gas customers may instead find themselves penalised by their loyalty. Someone who has a boiler breakdown cover package with British Gas and who receives their gas and electricity from the firm may actually find they are paying substantially more for the service than someone who has only just started to use the company.
Research from centre-left think-tank the IPPR found that people who have not switched energy providers typically spends £76 a year more on their gas bill than those who have. Among those who pay by direct debit, the price differential reaches an average of £89.
This price difference was also seen among electricity bills, with people who have not switched typically spending £27 more on electricity every year than those who did not.
Loyal customers have been spending more on gas and electricity for many years, but the IPPR discovered that the price discrepancy between loyal and disloyal customers has trebled since 2010.
Competition issues in the energy market could be to blame for the discrepancies – Ofgem has just referred the gas and electricity sector to the Competition and Markets Authority for investigation, and while a healthy competitive market would see companies offering good levels of customer service in order to gain and retain clients, this is not seen in the energy industry.
Instead, British Gas, which used to supply energy to the whole country and still supplies around 40% of the UK, can charge the customers they inherited from their period as a monopoly supplier considerably more than they charge new customers.
Not only does this disadvantage the British public, but it also impacts the ability of new gas and electricity suppliers to expand – smaller and newer suppliers do not have any inherited customers and cannot leverage higher prices from these customers, which limits their ability to offer lower prices to new customers.
In July 2012, Ofgem removed its ban on the routine overcharging of legacy customers. At the time, the energy regulator said that its tariff reforms would help it to deal with the problem, but the IPPR’s research indicates that Ofgem might not have succeeded in its aims.
A representative from Ofgem said that as of December 2013, energy suppliers have only been allowed to offer customers a range of four different tariffs per fuel, and have been forced to offer new and existing customers the same deal.
British Gas disputed the £89 figure, and said its energy efficiency measures will have reduced its customers’ gas bills.
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