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Energy comparison sites earn £30 for every switch, MPs told | |
(35 minutes later) | |
The big five energy comparison sites have admitted they earn up to £30 in commission every time a customer switches provider. | |
When customers change both electricity and gas accounts, they charge up to £60. | |
The figures emerged as the bosses of five price comparison sites were questioned by MPs on the Energy Select Committee. | |
The price comparison sites argued that the fees were justified. | |
Such payments are controversial, as sites have been accused of "hiding" deals which do not make them money. | |
John Robertson, a Labour member of the Committee, accused the comparison sites of not being fair to customers. | |
"There seems to be some kind of ethos in the energy market that says, 'I want to rip off every person I get hold of'," he said. | "There seems to be some kind of ethos in the energy market that says, 'I want to rip off every person I get hold of'," he said. |
Profits | |
Moneysupermarket said it charged energy suppliers £29 on average, which was fair. | |
"The fees are required to fund the price comparison sites. We are not a simple computer programme," said Peter Plumb, the chief executive of Moneysupermarket. | "The fees are required to fund the price comparison sites. We are not a simple computer programme," said Peter Plumb, the chief executive of Moneysupermarket. |
"We have to spend money on technology, and we have to spend money on marketing," he said. | |
Steve Weller, the chief executive of Uswitch, initially said the amount it charged was secret. | |
But when pressed by MPs, he admitted that the average commission was also £30. | |
MPs also heard about the profits made by the biggest five price comparison sites. | |
The most profitable - Compare the Market - was making £69.7m a year, according to Mr Robertson. | |
"Every part of the profit we make is based on a customer saving money," said Phil Morgan, the chief operating officer of Go Compare, which makes a profit of £19.8m. | |
"The larger the profit, the more savings we're putting into the market," he said. | |
Compare the Market later made it clear that its profit was derived from all the deals on its website, including insurance products. | |
New Rules | New Rules |
The bosses of the price comparison sites were called in front of the committee to explain why they often hide the best deals from customers. | |
Consumers who visit such sites are frequently directed to tariffs on which the website is able to earn a commission. | |
Cheaper deals may not be highlighted. | |
Most sites offer consumers a choice, asking them if they want to switch "today". | |
If they say yes, the better-value tariffs may not be shown. | |
However, the regulator, Ofgem, is introducing new rules for price comparison sites that are members of its confidence code. | |
From the end of March, such sites will have to show all deals on offer, including those that do not earn the site a commission. | From the end of March, such sites will have to show all deals on offer, including those that do not earn the site a commission. |
Most of the sites have promised to conform with the new rules, although some say they already do so. | Most of the sites have promised to conform with the new rules, although some say they already do so. |
The continuing study into the energy market by the Competition and Markets Authority (CMA) will also examine the role of price comparison sites. | The continuing study into the energy market by the Competition and Markets Authority (CMA) will also examine the role of price comparison sites. |