Energy industry regulator Ofgem has announced that it has launched “misselling” investigations into four of the UK’s largest energy suppliers. The four named are nPower, Scottish power, Scottish and Southern Energy, and EDF Energy.

The investigation concerns whether the four energy suppliers are complying with new regulations after a recent Ofgem probe.

What’s more, Ofgem has established a “Hotline” with Consumer Direct, so that any customers with examples, or evidence of misselling can tell their woes. The number to reach this service is 08454 04 05 06. Customers are being urged to call if they are at all concerned about the sales tactics of the four energy companies when negotiating energy contracts. This might include face-to-face dealings, or by telephone.

Ofgem is keen to review any evidence of misselling.

The regulator is throwing its weight around after its recent retail market probe and tougher obligations placed on energy suppliers.

The Ofgem Senior Partner, Markets, Andrew Wright, said:
“Suppliers have existing obligations to detect and prevent misselling and new licence conditions were brought in following our probe to further increase protection for customers. We expect all suppliers to comply with these tougher obligations but if our investigations find otherwise we will take strong action.”

It was last October when the new Ofgem obligations were introduced. It meant that the energy suppliers had to be more proactive in the prevention of misselling to customers face-to-face and over the telephone. Key were the conditions that if the companies were selling face-to-face, then they are obliged to provide their customers with an estimate before any agreements, or contracts are signed. Furthermore, most customers should get a comparison of the supplier’s offer with their current deal.

Ofgem acknowledged at the time that these newer obligations were tougher than those used within the general consumer protection law, but argued that the importance of the issues raised in energy deals were such that it warranted tough sanctions.

Both Ofgem and Consumer Focus have also published a leaflet with has been designed to give consumers helpful advice and guidance when it comes to dealing with energy suppliers.

Ofgem goes on to say that just because they have launched the investigations, does not mean to say that all, or any one of the four energy suppliers involved has either broken a condition of the new rules, or has broken the law.

The regulator has had to fine companies before following similar investigations. In 2008 nPower was stung for £1.8 million and £2 million was levied on London Electricity (which is now part of EDF Energy) in 2002.

Should Ofgem get upset with one of the companies supplying the UK market, it has the power to levy a financial penalty of up to 10% of the company’s total turnover.

Such a fine would make a sizeable dent in any one of the four energy suppliers named by Ofgem in this latest investigation.

Guest Article by Neil Camp

As we all know 2008 saw the price of gas and electricity go through the roof and for many domestic consumers this has meant they literally can’t afford to heat their houses and turn their lights on. In fact, reports now show that over 3 million households are suffering from ‘fuel poverty’ and that the majority of the country are paying over 10% of their income just towards their fuel bills. There is however a light on the horizon and many of the big gas and electricty providers have recently revealed their intended price cuts to the nation. But who is offering the best deal?

Scottish Power
Scottish Power cut their Price Sure fixed rate tariff by 10% in January which means that the average household will save around £80 this year as dual fuel customers. Unfortunately the company hasn’t mentioned the effect that the price cut will have on their other tariffs – if any – and so I can’t comment further on this.

Scottish and Southern
Scottish and Southern are part of a larger group however they have independently announced their gas and electricity price cuts which will come into effect from the end of March 09. As things stand they intend to cut gas prices by 4% and electricty by 9% and this will save the average dual fuel customer around £66 per year. Here there is no mention of specific tariffs and so it is assumed that the price cut is good for all customers.

British Gas
Everyone waited in anticipation to see what Bristish Gas would do when the first of the price cuts were announced at the beginning of the year. Not surprisingly they have virtually matched the other providers and are cutting prices by 10% on most tariffs from 19th February 09. For dual fuel customers this can mean a saving of well over £100 per year, depending on your annual consumption.

N-Power
And finally N-Power who have gone down a slightly different route. Their price cuts are to come into effect from May 09 and are set at a whopping 16% for gas but only 3% for electricty. This is fantastic news for households with a large gas consumption but for the rest of us – providing we are dual fuel customers – it averages out at around 10% overall saving again so no real difference from the rest.

In Conclusion
It seems that the price war has started but nobody really wants to take hold of the reins. All of the large providers are offering similar price cuts and so the one you go with will depend on your annual consumption and the unit price they’re offering. Costs are still around 50% higher than they were in 2007, even with the new reductions, and so there are still going to be millions of households struggling to pay bills. You should do your homework and shop around for the exact tariff that suits your needs so that even if the price cuts are temporary, you can still take full advantage of them.

Guest Article by Clare Lynock

Marks & Spencer have this week announced a move into the energy market as part of a new deal with Scottish & Southern Energy.  Apparently, customers will now be able to buy gas and electricity in their shops and on their web site and earn rewards for signing up, renewing contracts and, perhaps more importantly, for cutting consumption.

M&S claim that their energy prices will be competitive, at around £1,196 per year for an average user, and the same as existing SSE customers who buy dual fuel by direct debit.

M&S Energy customers will get a £15 voucher if they reduce their annual energy usage by 10% and another £10 voucher if they opt for paperless billing.  Those who switch to M&S Energy ‘Dual-fuel’ also receive a £20 M&S voucher on sign-up and an extra £10 voucher for each year they remain with M&S Energy.  The deal will be launched on October 27th on the M&S web site and available through its network of stores by the end of November.

Some would say that the energy market is already complicated enough without major high street retailers jumping on the bandwagon.  There’s a plethora of suppliers to choose from and each has its own bewildering array of promotional offers, incentives and discounts to baffle new and existing customers with.  However, M&S have a world-class brand, a reputation for quality and a loyal and trusting customer base to leverage and I suppose selling energy is no worse an idea than Tesco selling car insurance or John Lewis selling holidays.

But where does this relentless drive for diversification end?  M&S cars?  M&S mobile phones? M&S stair lifts?  The retailer is already selling electrical goods and furniture and this new energy deal is part of an ongoing initiative to expand into a wider range of goods and services. 

Clearly, we are living through troubled times and high street retailers are under increasing pressure to innovate their way out of the current downturn in sales and the inevitable slump in profits.  M&S also face increasingly difficult trading conditions and they have fallen from grace with the City since those heady days of £7.50p per share valuations just last year.  Their current share price of £2 speaks volumes about investors’ opinions on their short to medium-term prospects! 

Utility companies tend to have much more of a charmed, ‘dull-but-steady’ existence, fairing well through the tougher trading periods but, conversely, fairly unexciting through the good times too. SSE, one of the ‘big six’ domestic energy suppliers with around 8.5 million customers, will want to use this new link with M&S to reach additional customers and grow its market share.  M&S will be happy to have the new revenue stream to hopefully prop up losses in some of its more ‘sensitive’ product lines.

So, it may have all the makings of being a sensible deal for both parties but what about the poor consumer?  Will M&S customers be getting a great deal?  Will they be better of than buying direct from energy suppliers in the open market?  Only time will tell but I doubt it.

I don’t think a few vouchers could ever persuade me to stick with just one energy supplier purely because M&S choose to recommend them.  However much I like M&S as a purveyor of good food, boxer shorts and socks, I won’t be fooled into trusting them to supply my every need!  There are far too many deals and  incentives in the market that make it more lucrative to regularly switch my energy supplier to save money.  The vouchers simply don’t compensate for the potential savings lost.  However, if M&S ever get the confidence to guarantee the best prices in the marketplace and they promise to take the leg work out of constantly switching supplier for me… then I might just reconsider.

Article by Alan Potts

• 4 million customers have no access to best offers
• Prepayment meters cost £118 more than direct debit
  
• Quarterly cash or cheque payments cost £80 more than direct debit

Announcing the findings of a seven-month investigation into Britain’s energy market, the energy industry regulator, Ofgem, has found no evidence of a ‘cartel’ amongst the big six suppliers, but it warns gas and electricity suppliers to stop charging customers different prices for paying by direct debit or pre-payment meters.

The report highlighted 4 million households that were £55 a year worse off because they couldn’t take advantage of the most competitive offers; households using pre-payment meters being charged an average of £118 more than direct debit customers; and households paying quarterly by cash or cheque being charged an average of £80 more than those who used direct debit.

According to Ofgem, although it found that the market works well for most consumers, many of the most vulnerable customers, including pensioners and low income households, were less likely to be able to make informed choices about tariffs under the current system. Customers not connected to the mains gas grid were losing out too.

The regulator proposes wide-ranging reforms which include a requirement for companies to help all consumers access the best deals and more transparency to show the link between the wholesale price of energy and the price charged to customers. It also wants to stimulate new competition by making it easier and more attractive for smaller suppliers to break into the market, currently dominated by six companies – British Gas, ScottishPower, Scottish & Southern Energy, EDF Energy, Eon and Npower.

Consumers have already been hit by two hefty price hikes this year and energy suppliers continue to blame soaring prices in the global wholesale gas and electricity markets. The recent Which? report on energy suppliers also reveals widespread dissatisfaction amongst customers, the lowest of all industries.

The Ofgem report is therefore likely to receive a luke-warm reception as many will feel disappointed that it doesn’t go far enough to impose its recommendations.

Mini-Post by Alan Potts