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Over one million Belgian households pay too much for gas and electricity

Illustration picture shows a bill in front of a gas meter (BELGA PHOTO MICHEL KRAKOWSKI)
11:28 16/12/2020

Electricity and gas prices have fallen in Belgium during 2020 but Belgian households have not benefited. That’s the conclusion drawn by the Electricity and Gas Regulatory Commission (CREG).

In fact, more than one million Belgian households are paying too much for their gas and electricity. "That's pretty alarming,” said Laurent Jacquet, the director of CREG. “This certainly raises questions.”

According to the CREG, electricity prices in 2020 are below the levels of the previous three years. Prices have dropped 10% on average in 2020. There are two reasons for this: the coronavirus crisis and the greater availability of means of production, especially renewable energy.

For gas, the price drop is even greater than for electricity. There has been a 26% decrease on average in relation to the previous three years.

The impact of the pandemic on electricity demand was particularly significant. Consumption fell by 13% in April and by 9% in May. However, the demand for gas has not been changed by the health crisis.

The CREG notes that, despite the existence of more advantageous supply contracts, a majority of Belgian households continue to source their energy from more expensive suppliers. These may be households that have not changed suppliers since market liberalisation began in 2007. For electricity, 900,000 households have not changed their contracts for 13 years.

For gas, 400,000 households have remained with the same supplier since 2007. As for households that have switched suppliers, many have opted for the most expensive contracts on the market.

The CREG points out, however, that the "switch rate" - the percentage per year of households switching suppliers - is improving. This percentage is higher in Belgium than in some neighbouring countries. Unfortunately, Belgian households who change contracts do not always make the best choices.

The CREG finds the maximum difference between the most expensive contract and the cheapest contract is €864 for electricity and €340 for gas.

Many Belgian households, about 300,000 households for the supply of electricity and 170,000 households for gas, are also trapped by "dormant extension contracts". These are expensive contracts that some suppliers use to extend expired contracts, with terms of several years or even an indeterminate period.

According to CREG figures, two million Belgian households have opted for the 10 most expensive contracts in the electricity market. In comparison, only 268,000 households chose one of the ten cheapest contracts on the market.

With regard to gas, 1.2 million households have a supply contract among the 10 most expensive on the market. Only 172,000 households opted for one of the ten most advantageous contracts.

CREG estimates that one million Belgian households could save €500 on their annual energy bill. In the Walloon Region, it is estimated that 350,000 households could save €240 on their electricity bill and €300 on gas bills. In Brussels, 200,000 households could pay €230 less per year for their electricity and €320 less for their gas.

To explain why so many households are not changing enough suppliers or making the wrong choices, CREG believes that the electricity and gas markets are too complicated for the general public to understand. Changing contracts and comparing available offers is a complex task. There are administrative steps to be taken and they are not available to everyone.

In addition, consumers have difficulty accessing their contract data and this prevents them from comparing the contract they have with offers from other suppliers. The CREG notes that the details in supply contracts, such as terms and conditions, special conditions, and tariff conditions, are overly complex and make transparency and understanding difficult.

CREG points out that the cheapest products often come with extremely strict conditions that hold back consumers. These are often digital products whose contracts are filled out via the internet and who offer virtual transactions and advice that dissuades many consumers. "This makes the task difficult and problematic for many consumers," said Jacquet. Sometimes, by not satisfying certain criteria in the online contract, consumers are automatically switched to a more expensive contract by the supplier.

The Director of the CREG also advises consumers to be incredibly careful about the terms of payment. Some suppliers, for some contracts, request payments in advance, sometimes for a quarter or even for a full year.

Finally, the CREG pinpoints the problem of the annual flat fee. This is the fixed component of a contract. Depending on the suppliers and the contracts, it can vary from zero to several hundred euros. The amount of this levy tends to increase, the CREG points out.

The CREG suggests eliminating dormant extension contracts. It wants suppliers whose customers would be required to intervene and change their contract to inform them about their options and the actual duration of their contract. This would be more transparent and would allow the customer to better compare his contract with those of other suppliers in the comparison tables. Dormant contracts, often older, are no longer accessible to new customers and are therefore no longer visible in price comparisons.

It also calls for strengthening the "consumer agreement" that is supposed to protect the customer from an energy supplier. This agreement guarantees the rights of consumers, but it is clear that the majority of suppliers do not uphold this. Only 9 out of 19 suppliers protect their customers with this type of agreement. The CREG says that this "consumer agreement" must be made compulsory and made accessible to SMEs that, until now, do not benefit from it at all.

The CREG is also calling for a reform of fixed-term billing. The fixed term is a fee, for example €50 per year, that the energy supplier claims. The CREG requests that this "fixed term" be billed in proportion to the number of days of supply. Indeed, when a customer changes supplier during the course of a contract, for example after two months, some suppliers will force him to pay for the duration of the contract. This may be several months or, in some cases, the remaining years in the case of 2- or 3-year contracts. This can result in a payment of in the hundreds of euros.

The CREG also calls for more readable contracts. It proposes the introduction of a QR Code. This code, assigned to each contract, would allow the consumer to have accurate information about their contract, and to obtain a detailed description of the product. This would allow it to better compare its contract with the market offer. This QR code mentioning the rate sheet could be on the invoice sent to the customer, the CREG suggests.

The CREG advises consumers to use comparison tools whenever possible. In particular, the "CREG Scan" is a "unique comparison tool in Europe," according to the CREG. In six clicks, the consumer can compare their contract with the most expensive and cheapest offers on the market.

Currently in Belgium, there are 14,596 different supply contracts. Many of these contracts are old contracts that are no longer offered to new customers. Indeed, the current offer available to the public is 724 contracts. Thanks to the "CREG Scan", all 14,596 contracts can be compared to the offers currently available.

Finally, the CREG plans to conduct awareness campaigns to inform the public of the need to compare its supply contracts in order to opt for the most advantageous offers. Since October, 170,000 households have consulted the CREG comparator.

Written by Nick Amies