The energy crisis has caused unprecedented increases in consumers’ energy bills. It has also caused the bankruptcy of numerous energy suppliers. When another supplier went to the wall – my own in March last year – I knew I had to find a new offer and quickly.
However, what I did next is what consumers should not do. I simply picked the offer that a major supplier advertised as the best, without checking whether this was really the case.
It was simply the easiest and quickest option available to me at that time.
Comparing apples and pears
A few months later, while looking at how much more I was now paying each month, I started to think about whether I had got a good deal.
I began to browse an energy price comparison website. Unfortunately, the information was simply not clear for me to make an informed choice. The site just proposed three different contract offers, each using different ways to calculate the variable price, so the estimated monthly bills were simply not reliable.
I closed the website, not knowing what to do.
Making the calculation – it’s spreadsheet time
This all stayed in the back of my mind, until I decided it was time to pursue my investigations further.
I started a spreadsheet table, in which I added hourly electricity prices in Belgium in the previous two years with a major supplier. By way of comparison, I also added information on dynamic price tariffs, which are available in Belgium but unfortunately not yet in Brussels. Dynamic offers consumers the option to adapt their consumption to when demand is lower and electricity is therefore cheaper (e.g., late at night). This can offer savings compared to a variable contract (where prices evolve over a period e.g., per quarter) or a fixed one (where the price remains the same).
I then realised to my horror that I was on my supplier’s most expensive tariff available. I called them and asked them to switch me to a cheaper one. To their credit, they did so, and I immediately made a 20% saving. But why was I not put on that tariff to begin with? I’m now on a variable contract – as fixed contracts were no longer available at that time in Belgium – but my own calculations revealed that with a dynamic price tariff I could have saved even more, although that option was not open to me.
Energy markets: a nightmare for the uninitiated
As it is my full-time job to work on these issues, I realise that I have access to more information on energy markets than the average consumer. This enabled me to make the best choice for me because I spent a good couple of hours trying to understand the electricity market in Brussels. Still, it was a struggle and it took me months to take the right decision.
Most consumers simply do not have the time to become full-time energy experts
But for others, this task is far from straight-forward. Most consumers simply do not have the time to become full-time energy experts to try and understand what they are paying for and if they are getting a good deal. And at all the energy-related events I attend (and there are a lot), I hear the same thing from colleagues, most of whom have as much knowledge of the sector as I do.
Comparison websites are just not up to the job to help consumers to do this. They may even make things more difficult, because the way they estimate the monthly bill is not always accurate.
Once you’ve settled on a supplier, things do not get any easier. The summaries of the pre-contractual information provided by energy companies in Belgium are only understandable if you have knowledge of electricity markets and are willing to invest time in tracking the evolution of energy prices to see how the tariff was calculated. This situation is similar in other countries too.
Let’s get back to basics
Since the energy crisis, consumers have had to get used to paying more to power and heat their homes. This makes it all the more important that the information they get from energy companies is clear and easy to understand. Consumers have the right to know what they’re paying for and whether they would be better off switching to another tariff or even supplier.
The European Commission is proposing to address this in its new Electricity Market Design proposal. Energy companies would be obliged to inform their consumers in concise and simple language about the terms of conditions of their contracts. This will hopefully be helpful for consumers.
Consumers have the right to know what they’re paying for
But I can’t help feeling that there is probably something missing. Yes, energy companies need to do their bit in simplifying the language they use and making it clear how much consumers will pay. But the more complex energy markets become (and the more opportunity this offers for consumers to make savings), the more consumers will need access to information that they can actually understand (e.g., through dedicated and reliable comparison tools) so that they can make the choice that’s right for them.