A survey has revealed that energy firms are being overpaid £5.4 billion a year by loyal customers.
The study carried out for energyhelpline by research company Opinion Matters shows customer loyalty to energy suppliers has cost them £18.7 billion in extra bills since privatisation.
The £5.4 billion over-payment is a direct result of customers being on standard tariffs, which are around £300 a year more expensive than the cheapest deals on the market. Customers tend to be moved to standard tariffs when staying loyal to a supplier and not switching for a year or so.
Other findings from the study include:
15% of households that have not switched suppliers for 5-10 years, have overpaid between £1,000 and £2,000.
7% of respondents who have remained loyal for 10 to 15 years have lost between £2,000 and £3,000
10% have stayed with the same supplier for longer than 15 years and have overpaid by more than £3,000 each!
What barriers are there to switching and why do people overpay?
When asked why customers are loyal to suppliers and don’t switch, 53% intriguingly gave quality of service as their main reason despite energy suppliers having some of the worst customer satisfaction ratings, typically only beaten by pay day loan companies and sometimes by banks.
Another 41% said suppliers’ reward schemes. Consistency and familiarity with the supplier ranked third and fourth.
80% of respondents agreed with the statement ‘if it isn’t broke, don’t fix it’ indicating that most consumers think things are fine and they’re not overpaying even though the CMA have said 70% of customers are.
Mark Todd, co-founder of price comparison site, energyhelpline:
“The media talks a lot about broken trust between energy suppliers and customers but in reality there appears to be too much trust. Many customers are staying loyal even while they are getting fleeced – overpaying by around £300 a year and the most loyal £3,000 a decade.
“If households continue to stay loyal, providers have no incentive to offer cheaper deals.