Energy companies ripping people off

Ofgem says that over 4m British customers are getting a bad deal from their energy companies...

Last Updated: 31 Aug 2010

Although its latest seven-month probe found that the energy markets ‘work well for most’, regulator Ofgem also believes that some customers are ‘missing out on the full benefits of competition’. In particular, it’s referring to the 4.3m people in the UK without a gas supply, who apparently have no access to any of the best offers. Ofgem is now threatening to report the industry to the Competition Commission unless it raises its game…

It wasn’t all bad news for the industry today. Ofgem found no evidence of a price-fixing cartel – in fact, since competition has led to a ‘wide range of tariffs and products’, and awareness of switching is on the increase, things are actually operating pretty well as far as many customers are concerned. The problem is that not everyone is benefiting – and as always, it tends to be the worst-off and the most vulnerable that end up losing out. It’s these people that Ofgem’s proposed market reforms are intended to help.

One of the main recommendations as far as homeowners are concerned is that payment methods shouldn’t determine prices. Estimates suggest that those on pre-payment meters pay £118 more for their fuel every year than those who pay by direct debit, while those who pay by cash or cheque pay an extra £80. Ofgem thinks this is unfair (particularly since this tends to be a socio-economic distinction, i.e. the fuel poor are more likely to use the more expensive methods), so direct debit discounts may soon be a thing of the past. It’s also demanding more transparency, and tougher rules on annoying doorstep salespeople (for which we'll all be truly grateful).

There was also some good news for small businesses. In response to complaints about unfair contract terms, Ofgem is recommending specific measures to curb sharp practices – welcome news after the much-lamented demise of Energywatch last week (although what this will actually amount to in practice is anyone’s guess). And there was encouragement for smaller electricity suppliers – the regulator wants to help them buy wholesale energy more cheaply, thus ensuring more competition for the Big Six.

Ofgem admitted there’s nothing it can do protect customers from higher energy prices – that’s an inevitable consequence of spiralling commodity costs – but it reckons energy companies must try harder to help the disadvantaged. ‘We accept that global influences are pushing up costs, but the suppliers must change their behaviour and cement consumer confidence', Ofgem chief executive Alistair Buchanan grandstanded this morning.

So a light slap on the wrist – but it’s unlikely to be enough to satisfy the large contingent of people who think the big energy suppliers are callously profiting from our current misfortune...

In today's bulletin:

Markets tank amid European dis-Union
Spielberg goes to Bollywood
Energy companies ripping people off
10 Reasons to be cheerful
Rowling riches tell a false story

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