People who change energy providers can make annual savings of up to €360. So why are we so slow to switch to better gas and electricity rates? By Conor Pope Consumer - Affairs Correspondent
Irish consumers have collectively wasted close to €1 billion over the last five years by spending way more than necessary to heat and light their homes.
Now Pricewatch knows that number might sound absurdly inflated at first glance but, if anything, we are underestimating the nation's wanton wastefulness when it comes to energy.
Here's why: There are around 1.7 million households in the Republic and at least half have remained (foolishly) loyal to their electricity and gas suppliers over the past five years.
That means there are at least 850,000 homes paying standard unit rates for domestic gas and electricity right now. Typically these rates are over €200 more than the cheapest discounted rates available to switchers. In fact, someone seeking out the cheapest providers right now could easily knock €360 off their energy bills over the course of the next 12 months.
But to make the savings, people need to switch, and a staggering number of Irish people don't bother. According to figures from the Commission for Energy Regulation (CER) more than half of Irish consumers have never switched their energy provider, while the numbers who have switched in the last 12 months is a whole lot smaller.
A less- comprehensive Pricewatch Twitter poll of more than 500 people last week echoed these numbers. We asked people if they switched provider annually, occasionally or never. Only 15 per cent said they switched annually, while 40 per cent said they had never switched provider.
They are all wasting money and just how much is really quite shocking.
While annual energy savings of €360 are available right now, for the sake of this piece we will take a more conservative approach and put potential savings at €200 per year. That means that over the past five years more than half of us have wasted €1,000 each which, when totted up, comes to a total of €850 million.
That is not to be sniffed at.
Drill a bit deeper into the official statistics from the CER and the picture is actually more depressing. According to its most recent report, only 22 per cent of domestic electricity customers are on a plan which offers some level of discounts right now, with the remaining 78 per cent paying the full whack, blissfully unaware they are being ripped off.
Even the 22 per cent who are making savings are not saving as much as they could be. While discounts of up to 26 per cent are available to electricity customers who switch from expensive providers to cheaper ones, most electricity customers on discounts are getting a reduction of less than 5 per cent off the standard unit rate.
Many of the discounts are for customers who pay by direct debit or only get e- bills but, apart from those crumbs, they pay the full rate. When it comes to gas, the news is slightly better. But only slightly. All told, according to the CER figures, just over 40 per cent of gas customers are getting some class of discount, although - as with the electricity market - most are only getting discounts of less than 5 per cent despite the fact that a canny switcher could easily knock 20 per cent off their annual bill by choosing the cheapest provider over the dearest.
"There are quite a few reasons why people are reluctant to switch," says Simon Moynihan of price comparison and switching website, bonkers.ie. "People who get the Household Benefits Package of €35 a month can have it paid directly to Electric Ireland for electricity or to Bord Gais Energy when it comes to gas.
"They retain the allowance no matter which provider they are with but if they switch from those two, then the money is paid directly into their bank account and it doesn't come automatically off their energy bill. Some people are reluctant to make the switch because they are worried they will spend the money in their bank account and not be in a position to afford their electricity bills and gas bills when they fall due."
Moynihan points to a second cohort who are unaware of the fact that there is an expiration date on the discounts. "They think they've switched and that's all they need to do. Then there are people who think it would just be too much hassle."
He cites another reason. Energy bills are a moving target with price fluctuations "so it is really hard to nail down when you are saving money. People are usually driven to switch by high energy bills in winter, but ideally people would switch provider at the same time every year. Just put the date in the calendar and set aside 10 minutes to make the switch and you will save money," he says.
Quite apart from the savings to be made by switching, there are question marks over the speed at which utilities pass on cuts in the price of their core product on international wholesale markets.
The best - or easiest to see - illustration of how far oil and gas have fallen in recent years are garage forecourts where prices have dropped by about 50 cent or 30 per cent in the past few years.
Irish wholesale gas prices were down 35 per cent on average in July 2016 compared with July 2015, according to a market report published by Vayu Energy, while the average wholesale price of electricity in the Irish market was down 27 per cent.
The price of energy for domestic users has fallen but not by a comparable amount. Consumers would be right to wonder why.
Luring new customers
Suppliers say today's wholesale prices do not reflect retail prices because they buy up to two years in advance, but the reality is that all providers put a good chunk of the money they have been saving on luring new customers by offering discounts and even cash incentives.
All the utilities say they keep their prices under constant review and they have dropped them over recent months. In the first half of this year, market leader Electric Ireland reduced its electricity standard unit charge by 6 per cent while SSE Airtricity lopped 5 per cent of its gas unit rate and standing charge. The falls are real. They are just very small.
Energia is currently offering new electricity customers a 26 per cent unit rate discount while new SSE Airtricity customers can take advantage of electricity discounts of up to 25 per cent. This would see the average annual cost of domestic electricity fall by over €200.
New customers of Flogas, meanwhile, can reduce their bills by 20 per cent for the first year in a move which would save them more than €150.