Is competition in the marketplace always good for the consumer?

When I was a boy, we used to get our Gas from British Gas, and our Electric from the Yorkshire Electricity Board (YEB). The only time the supplier name on your bill changed was if you moved house to a new region, and even then, it was actually just a regional branch of the same company.

Utility billsFast forward 30 years. How many providers of Electricity are there today in the UK? Well, according to Ofgem, there are 162. Gas has 139 providers.

Now I don’t know about you, but I reckon Gas and Electric are pretty standard commodities. They are not cars, or mobile phones. You can’t get your gas in a different colour, or packaged in a cool, trendy box. You can’t have your Electricity provided with better quality versus that of your neighbour – it’s just electricity. Yet you have over 150 different companies that you can buy this exact product from, all of whom are pouring their Gas / Electricity down the exact same pipes or cables to your door.

I know that what we are shopping around for, are those providers who have managed to secure the purchase of a tranche of energy at a favourable rate or can administer getting that energy into the pipes or wires with the least overheads. Competition is good we are told. The consumers benefit from suppliers fighting for our custom. But do you ever stop and think about the collective amount of wasteful administration involved when 150+ companies are all offering you EXACTLY the same product.

Nowadays we are told to lock-in to a tariff. Mine expired recently and so I was back on the market looking at what is on offer. My existing provider wanted to increase my costs by 40% if I did nothing! Even if I moved to their best new tariff it was still a 21% hike.

First I did a bit of google fact finding. There may be over 150 providers, but the top 6 command over 90% of the UK energy market. The young protagonists are enthusiastically trying to wrestle some of this value away with more attractive – but still expensive – pricing. But wary consumers tend to feel that if something looks too good to be true it probably is, so there is a general reluctance to move to one of these start up providers. This may be with good reason as generally these new companies do not have good customer feedback so far.

Next, I turned to the equally prolific comparison sites. Amongst the Operatic, curly moustachioed tenors, or hot pants and high heel wearing businessmen to choose from, there is plenty of choice here. In case you do not watch any TV and have no idea what I am on about, I refer to the advertising campaigns of a couple of the market leaders in the comparison world.

I diligently completed their on-line forms. Personal details, Energy usage history, duel-fuel, Direct Debit payment, On-line billing, self-declaring meter readings, and so on.

What did my shop-around result in? Well I still ended up with an 11% hike!  The free-market and open competition is supposed to give the consumer a better deal. But I do wonder that with so many layers now all adding administration and profit margin, the beleaguered consumer is not really getting such a great deal. We are just lining the coffers of more and more companies as our energy makes its way from origin to destination.

Modern life continues to over-complicate things!

 

There is a bit of “The Grumpy One” in all of us. I hope to help you get in touch with yours!

 @GrumpyBritDad   

GBD

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