Consumers let down badly by energy regulator

Published 03rd Oct 2009

The options for customers after Ofgem lets gas and electricity suppliers off the hook

Millions of people are paying too much for their electricity and gas because Ofgem, the energy regulator, has failed to enforce a fair deal for the consumers it was set up to protect.

Despite the regulator’s claims that it promotes “choice” and “value”, consumer groups say that customers are so confused by the range of suppliers and products on offer — and baffled by the bills they receive — that they are paying far more than they should. At the core of the problem, say critics, is lax regulation — a situation that will not be improved by new Ofgem guidelines that are supposed to tackle the worst abuses committed by gas and electricity providers.

Last month “licence conditions” were introduced by Ofgem to force suppliers to reduce the price gap between online-only tariffs and the standard deals that most households pay. But consumer groups say that Ofgem looks unwilling to force the big six energy companies — British Gas, ScottishPower, E.ON, EDF Energy, npower and Scottish and Southern Energy — to comply.

Zoe McLeod, an energy expert at Consumer Focus, the campaigning organisation, says: “These new rules are a step in the right direction, but if Ofgem is not going to enforce them, then the rules aren’t worth the paper they are written on.”

Meanwhile, moves to improve and standardise bills have been delayed until July. These will require energy companies to provide customers with details of their tariffs and explain in simple terms the cost of the energy being used. However, campaigners say that the rules are not specific enough. Separate plans to introduce annual summaries have been welcomed, but it will be the end of next year before customers begin to receive them.

Ofgem has also ruled out changing regulations that allow energy companies to wait two months before informing customers that their bills have gone up.

Fiona Cochrane, of Which?, the consumer organisation, says: “Ofgem admits that consumers find the energy market baffling, but it has not done enough to tackle it. Changes to tariffs and charges can still be incredibly difficult to understand — a problem that Ofgem needs to address urgently.”

Consumer groups are angry that measures to tackle doorstep selling have also been delayed until January. Seven million Britons have switched supplier after being approached at home, but less than a quarter of those surveyed were happy with the move, according to uSwitch, the comparison website.

The new measures will require sales staff that turn up on your doorstep to be more open about the cost of the tariffs being sold. However, there are fears that the rules do not go far enough. Audrey Gallagher, of Consumer Focus, says: “There is a real fear that the new rules on doorstep selling will simply push the less scrupulous sales practices towards telesales, where rules are less rigorous.”

Consumer Focus criticises Ofgem for putting too much faith in customers switching supplier to keep companies in check. There are more than 4,000 tariffs on the market and half of the UK’s energy customers have never switched, while 30 per cent have changed supplier only once, according to uSwitch.

Switching has been made easier in recent years, but the process can still be time consuming and confusing. Research by the University of East Anglia found that up to 39 per cent of consumers who do change tariffs make the wrong choice and opt for a deal that is more expensive.

Scott Byrom, head of energy at Moneysupermarket.com, another comparison website, says: “Ofgem believes that it is a fair market, but the gap between the best and standard deals is getting wider.”

An Ofgem spokesman says: “We have introduced new standards of conduct to ensure that suppliers do not sell tariffs to customers that they do not understand or that are inappropriate. Suppliers have also already taken steps to reduce the gap between certain types of tariffs.

“New requirements covering direct selling, which ensure that suppliers provide clear, accurate and easy to understand information, will apply to telesales as well as doorstep selling.”

However, with the protection provided by Ofgem in question, consumers are being urged to take matters into their own hands. Here we explain how to obtain the best deal.

Go online

The most expensive ways to pay for electricity and gas is to use a prepayment meter or to pay for a standard tariff by cash or cheque. Most customers on these tariffs are unable to access online deals, which remain the cheapest by a considerable margin.

An average user on a standard dual-fuel tariff from ScottishPower would pay £1,362 a year, against £975 on its Online Energy 7 deal.

Compare usage Energy companies offer eye-catching deals to push them to the top of the best-buy tables, but these are based on average consumption of 20,500kWh of gas and 3,300kWh of electricity. If you are a heavy or light user, these average figures will not apply and the deals may be much more expensive.

Gareth Kloet, head of utilities at Confused.com, the comparison website, says: “These tables provide an indication, but the only way to get a true comparison is to know your usage and consult a comparison website that is Consumer Focus-accredited.”

Avoid penalties Wholesale energy prices are not expected to rise in the next year, but energy companies have warned that bills could increase. This has prompted some consumers to consider capped or fixed tariffs. However, some of these deals have hefty fees for leaving early, so households should think carefully before committing for 12 months. These exit fees can range from £25 to £70. “Read the terms and conditions and make sure that you stay with the company for at least 12 months,” Mr Kloet says.

Remain vigilant Thousands of customers have come off fixed tariffs this week and experts have warned that many will either be bumped on to pricey standard tariffs, or moved to new 12-month fixed tariffs with expensive exit fees. ScottishPower is moving customers to its Capped Price Energy tariff, with exit fees of £50 for customers who want to leave before 2010.

Mr Byron says: “Make sure that you are moving to a good deal, particularly as we head into the winter months, when households use 50 per cent of their annual energy consumption.”

Watch for price increases Suppliers have 65 days to inform customers of any price rises. Customers, on the other hand, have only ten working days after they have been told about the deal to say whether they accept the higher charges or not. If you are unhappy with the rise, you can switch supplier before having to pay the higher price, provided that you do so within this short window. This is easy to miss if you are on holiday or have not checked your post.

Mr Byron says: “If you hear anything in the press about your energy provider changing prices, it is worth checking your tariff.”

Which? has called for proposals to increase the time available for switching to 20 days, but Ofgem has failed to put together a time frame for the introduction of new guidelines.

Counting the costs

Energy suppliers often place customers on pricey standard tariffs when they move to a new home, even if they had previously been on a cheaper online deal.

Customers can be charged up to £200 for switching from prepayment to standard meters.

Giving quarterly meter readings over the phone can be costly because many suppliers use 0845 and 0870 numbers.

Suppliers set direct debit payments based on customers’ highest monthly usage, typically in winter, leading to overpayments for the rest of the year.

Source: ' Times '

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