Simpler switching for tenants

Switching energy supplier, a relatively simple process for homeowners, is a hassle for tenants, more than three-quarters of whom have decided not to bother, says Gillian Cooper.

The number of households in the rental sector is growing rapidly, with 4.4 million households in the private rented sector and 3.9 million in social housing in England alone, according to the latest English housing survey. Unfortunately, people living in rented accommodation are less likely to switch supplier – it’s a trend that has been apparent for years.

Ofgem’s 2014 research found that 77 per cent of bill-paying tenants living in rented accommodation say they’ve never switched energy supplier. A fifth of tenants said they weren’t aware it was possible to switch supplier. The Competition and Markets Authority’s 2015 research found the same; that 77 per cent of tenants were non-switchers.

We’ve provided the authority’s energy project team with evidence from our Consumer Service helpline and local Citizen’s Advice offices that illustrate the types of problems tenants face when trying to switch.

So how do we make it easier? Citizens Advice has a couple of ideas.

First, it is time to update the ten-year-old OFT (now CMA) guidance on unfair terms in tenancy agreements. Research and evidence about consumer behaviour has increased since 2005 and it’s clear that there are significant differences in switching behaviour between tenants and homeowners.

Right now it’s quite a complex message for tenants. Ofgem’s guidance for tenants suggests that if you pay the energy bills for the property, you have a right to switch supplier, but you might need to get your landlord’s permission, sometimes in writing, or return the account to the original supplier before you move out.

A landlord isn’t allowed to stop people from switching payment method, but they might be required to switch the meter back to a prepayment meter at the end of your tenancy. This means tenants may have to pay or experience the hassle of getting the meters changed twice.

We don’t think it is reasonable for a landlord to be able to discourage a tenant from switching to a cheaper payment method given the savings available. Our July 2015 analysis found that prepayment meter users pay on average £226 more every year than households on the best online direct debit tariffs. Some landlords may prefer prepayment meters but they shouldn’t be able to force their tenants to pay higher tariffs for their convenience.

Something that should be a quick and easy way of saving money has suddenly become a massive hassle for these households. So it’s not surprising that many tenants simply don’t bother.

First, here’s a really easy way to fix this: by simply updating the guidance. It currently says: “The tenant should have the choice of supplier although he may be required to keep the landlord informed of any change and to return the account to the original supplier at the end of the tenancy.” This should be updated by simply deleting the second half of the sentence so it says: “The tenant should have the choice of supplier.”

The 2005 guidance also states that clauses saying “[the tenant must not] change the utility supplier without the landlord’s consent in writing” are “potentially unreasonable” and should be deleted – but we still see them. If such clauses aren’t enforceable, they should be removed.

It is important that the landlord knows the names of the existing utility providers so they can inform their new tenants. A new clause could be added to tenancy agreements requiring the tenant to inform the landlord of the names of the existing utility providers when they move out of the property.

Second, we’d like suppliers to make it clear that where a consumer has to end a fixed term contract early because of a house move, a termination fee will not be charged. Fixed term tariffs with termination fees are the most competitive deals in the market. If you don’t know whether you’ll be living in the property for a set period of time, then you probably won’t take the risk of switching and possibly paying a £60 dual fuel termination fee, as that would eat into or wipe out the savings you’ve made from switching supplier.

We know from our discussions with industry that many suppliers already waive the termination fees under these circumstances. It’s time to standardise that policy across the industry.

These two changes would send a clear message to landlords that tenants cannot be prevented from switching to an energy supplier of their choosing, and to tenants that it is far less hassle to switch than they might think. The updated guidance could be promoted through all the relevant landlord forums to make sure everyone is aware of the change.

Citizens Advice already does a lot of outreach work with consumers through initiatives such as Big Energy Saving Week or Energy Best Deal. These changes would allow our organisation, and other bodies, to promote a much simpler switching message aimed at tenants: switching supplier is a quick and hassle-free process.

The coming years will bring changes set to improve the switching experience including 24 hour switching and smart meters that switch between payment methods. Let’s not make the millions of households living in tenanted accommodation wait until the end of the decade for improvements.

Over to the CMA.

Gillian Cooper, head of retail energy markets, Citizens Advice