Consumer Focus recently wrote to Ofgem to request that it investigates the way that energy suppliers market and sell tariffs as part of its review of energy suppliers and their prices.
It’s a long letter (22 pages) but it’s an interesting read and contains some pretty shocking accusations that paint a less than glowing picture of energy market. Here’s a summary of the some of the key points Consumer Focus would like Ofgem to look into:
- People aren’t being notified about price rises until it’s too late – According to Consumer Focus, some energy suppliers aren’t doing a great job of keeping customers up to date about gas and electricity price rises. Believe it or not, at the moment energy suppliers don’t have to tell you if your prices are going up until 65 days after the price rise takes effect. Consumer Focus draws attention to EDF, which, despite announcing a price freeze until March 2011 in November, is still sending out letters to customers to inform them of a previous price increase that took effect in September 2010.
- The number of different tariffs on offer is confusing – According to Consumer Focus, there are 110 different gas and electricity tariffs, with 75 different prices available from the ‘Big Six’ energy suppliers alone. That’s a fairly huge number, when you consider that the end product you’re buying (your gas and/or electricity) is identical – after all, you won’t get better quality electricity or faster gas because you’re paying more! Consumer Focus’s recent research found that the public don’t know why things have to be so complicated either – over 70% said that they find the number of tariffs on offer confusing.
- Customers are being rolled onto new tariffs without their say-so – Consumer Focus reported that some people who have fixed tariffs that are coming to an end aren’t being treated as fairly as they should be. For example, some customers were being rolled onto new tariffs with penalty exit fees without enough prior notification – meaning that they either had to stick with a tariff they didn’t choose, or pay to switch to a different one. Consumer Focus says: ‘No consumer should be automatically rolled over onto a contract with a termination fee; they must opt into these deals. Consumers should be informed 30 days before the end of a contract that it is due to end and notified as to what tariff the supplier proposes to put the customer on.’
- People are being offered discounts that might not be as good as they sound – the structure of some of discount offers mean that a typical customer is unlikely to make the saving quoted, while other discounts are just too complicated and confusing, says Consumer Focus. For example, here are two real examples of confusing discounts that are on offer:
- British Gas Direct Debit Discount Dual fuel: “Up to £75 Discount Gas customers paying by Direct Debit will receive a discount off their Tier 2 consumption charges of 0.196 p/kWh, up to a maximum of £16.25 (inc VAT) per quarter (or £5.42 per month for monthly billing customers). Electricity customers paying by Direct Debit will receive a discount off their Tier 2 consumption charges (and night rates where applicable) of 1.873 p/kWh up to a maximum of £10 (inc VAT) per quarter (or £3.33 per month for monthly billing customers). Based on average annual consumption of 20,500 kWh for gas and 3,300 kWh for single rate electricity as at 10th December 2010, is rounded and includes VAT at 5 per cent. Discount received varies according to seasonal consumption.”
- npower Football Saver 2: “Payment of the Annual Direct Debit Discount – new npower monthly direct debit customers only. Provided you meet all of the requirements you will become eligible for our annual Direct Debit discount on your first anniversary date on which supply of your second (or only, if you have no mains gas connection) fuel by us started and will be credited to your electricity and/or gas accounts on that date. “
- Termination fees are being hidden in the fine print – Consumer Focus says that it has concerns about how people are told about termination fees when they sign up on their doorstep, over the phone or on the supplier’s website because the fees aren’t always easy to spot hidden in the small print. In contrast, it notes that ‘users of independent price comparison sites will be given clear notification that the tariff has a termination fee attached’. It’s also mentioned that termination fees can vary wildly – from as little as £25 to as much as £200. When they are actually charged varies too – some people are charged a cancellation fee if they move house, others aren’t, while some people have been charged a cancellation fee as soon as they apply to switch even when the supply does not actually get transferred until after the end of the contract period.
- Some salespeople aren’t telling customers about the best deals – Consumer Focus has suggested that some door-to-door salespeople for some energy suppliers are not telling people about their cheapest tariffs, meaning they don’t get a fair comparison.
What do think of the list? Is there anything you’d like to see added? Let us know in the comments.