Energy suppliers offer cash incentives
Filed under: Utilities
With rising bills prompting thousands of households to switch to smaller, cheaper providers in recent months, the 'Big Six' are forced to offer consumers a better deal.
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Disgruntled at ever increasing bills, 35,500 households switched from a big to a small supplier in January alone, a ten-fold increase on last September - according to Uswitch.com.
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Now some of the large energy companies are offering households cash incentives in a bid to lure these customers back. British Gas, the UK's largest energy company with 15.9 million household accounts, is offering £125 of free gas to former customers who have recently moved to a rival supplier. Under the terms of the offer, the sum would come off a customer's bill if they returned to British Gas and remained for a year.
Meanwhile Npower is also said to be working on a plan to offer a "monetary" reward to lapsed customers who return.
The move suggests success for consumer power with customers refusing to put up with rising prices when lower alternatives are available. Yet the Telegraph reports today that MPs are questioning how the suppliers, who claim to operate on low margins, can afford to pay such incentives which amount to million of pounds of free energy.
The big six companies have long defended price rises by attributing the high cost of wholesale energy on world markets. However Fiona O'Donnell, MP for East Lothian, said that the cash payments "raise questions" over whether the energy firms' profit margins are as squeezed as they say they are.
Tom Greatrex, MP for Rutherglen and Hamilton West, said that the payments are another example of "predatory pricing".
A British Gas spokesman said that the offer of money was "not unusual" in the energy sector, however she said that the figure offered varies. "We have a range of cash back offers which our customer service agents can use at their discretion as time-limited offers to attract customers," the told the newspaper.
Other big six companies said that they do not offer financial incentives for customers to return.