Energy prices: Gap between best and worst firms widens
1st September
The gap between the UK's best and worst energy providers is getting wider, says Citizens Advice.
Releasing its latest league table on energy companies' performances, the group found the worst firms are getting worse - and receiving more complaints.
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Small energy provider Extra Energy attracted 80 times more complaints proportionally than the firm that topped the table, SSE.
Extra Energy's 1,791 complaints per 100,000 customers between April and June was an increase on the previous quarter's 1,682. In the same period, SSE improved its performance with only 22 complaints per 100,000.
The second and third worst companies, Co-Operative Energy and Scottish Power, also increased their complaints ratio.
Co-Operative had 850 complaints per 100,000 customers, an increase on 819, while Scottish Power had 571, up from 558.
At the opposite end of the table, other companies that performed well include EDF, British Gas and E.On.
Gillian Guy, of Citizen's Advice, told the BBC: "The latest league table shows some suppliers are getting much better at sorting out their customers' problems, but it's disappointing to see others getting worse at dealing with complaints."
Extra Energy said it was improving its record and dealing with complaints more quickly.
"These figures reflect historic customer service issues that occurred during a period of time where Extra Energy saw our number of customers expand rapidly and unfortunately some of these complaints have taken longer than expected to resolve," said a spokesman.
"We apologise unreservedly to anyone who has not received the standard of service we expect of ourselves."
Energy prices to be capped for four million households
3rd August
Four million households that have to pay in advance for their electricity or gas will have their prices capped from next April, regulator Ofgem has confirmed.
The watchdog, responding to proposals from the Competition and Markets Authority (CMA), estimated that customers on pre-pay meters are overpaying to the tune of £220m a year, says the BBC.
Key or card meters are placed in rental properties to ensure bills are fully paid or are given to customers who have had repayment problems. They typically operate on more expensive energy tariffs and make it difficult for customers to switch suppliers.
The price cap is described as an "interim" measure ahead of a roll-out of smart meters by 2020. These will give customers the opportunity to choose either pre-payment or standard billing options. Because the technology is cheaper, they should also act to drive down prices.
However, Ofgem has been accused of not doing enough to force the so-called "big six" energy suppliers to treat customers better, especially in regard to those on standard tariffs that do not represent the best deal on the market.
A database, also proposed by the CMB, will be set up of such customers next year to allow rival providers to pro-actively target them with better offers, reports The Guardian.
Ofgem is also to force companies to include messaging on bills and other correspondence with customers highlighting the benefits of shopping around and switching to another provider.
First Utility managing director Ed Kamm said: "We are in real danger of continuing to fuel a 'tale of two markets' - helping those who already shop around and doing little to properly help those who are continuing to pay much more than they need to or should."
Energy price cap for four million – but have 'big six' been let off the hook?
10 March
Four million homes could see the price of their energy bills fall under regulators' proposals for a price cap, along with measures to allow suppliers to poach overpaying customers from rivals.
The recommendations are contained within an interim report from the Competition and Markets Authority into the failure of shopping around in the energy market.
Under the plans, households forced to use pre-payment key meters, typically fitted for low-earners and those who have had previous payment issues, would have their charges capped while more structural reforms were undertaken. The Daily Mail notes it would be expected to save the average affected customer around £90 a year.
The CMA said too many households were on pre-paid options that make it difficult to switch supplier and trap them into charges around £300 a year above standard tariffs. Under the new scheme, the majority would be offered the chance to move onto contracts, with only the most vulnerable who would struggle with retrospective billing left paying up front.
Other proposals include an opt-out database for those moving from key meters or on expensive standard variable rate tariffs for at least two years. It would be operated by Ofgem, the energy watchdog, based on submissions from suppliers and would allow other operators to contact customers to offer better rates to encourage more to switch.
Overall, the reforms could benefit around seven in ten households who are currently overpaying by a collective £1.7bn a year relative to the best deals available.
But there was criticism over the dropping of a more radical price cap put forward last September, which would have applied across all standard tariffs for a temporary period. There are also no plans to break up the so-called "big six", which both generate and supply energy and are accused of using profits from retail units to subsidise production losses.
"This investigation has confirmed that millions of families and businesses have been overcharged for their energy bills to the tune of billions of pounds, yet energy companies are still being let off the hook," Labour's energy and climate change spokeswoman, Lisa Nandy, told The Guardian.
Nandy also complained of government intervention, after ministers last year hinted a blanket price cap "may not be compatible" with efforts to improve competition. "This looks like a dangerous abuse of ministerial power which risks compromising the inquiry's independence," she said.
Another energy price 'cap' is on the table – is it a good idea?
07 March
Capping energy prices, once a cornerstone policy for Labour under Ed Miliband, was ultimately seen as a flop after the crash in oil prices took the heat out of the market. But it might be coming in after all.
Last month, in a 55-page paper packed with potential remedies to fix what regulators see as a broken market, the Competition and Markets Authority proposed a price cap for customers who do not shop around. It would be a "transitional" measure while more thorough reforms were undertaken, which could include new reporting rules to "ringfence" big supplier's retail sales arms and expose their profit margins.
The measure appears similar to the temporary price cap proposed by Miliband, which was intended to provide respite for the duration of a major review into energy competition. It reset the political landscape on the issue, but ultimately looked clumsy when prices fell of their own accord, thanks to the great oil slump. It ended up being blamed for relatively shallow cuts to bills relative to the fall in wholesale prices, as suppliers kept prices high in case a future Labour government froze prices on coming to power.
The CMA policy is different from Labour's proposal, in that it would only apply to households that failed to shop around for energy. They typically revert from cheaper fixed price deals to "suppliers' expensive 'standard variable' tariffs", the Daily Telegraph reports, but under the new proposals they would be "rolled on to a new, cheaper 'safeguard' tariff".
The CBI has objected to the idea, arguing that an "interventionist" policy to protect non-switching customers runs counter to the message that people should look for the best energy deals. It instead urges the CMA to concentrate on measures that would increase the number of tariffs.
Whatever happens with the capping options, big changes are coming. The simplified four-tariff structure, on which the 'big six' companies have blamed for the removal of green energy options, is almost certain to be ditched.
The Independent reported last week that, in the absence of a simple way to support renewables, tens of thousands of families have signed up to a 'clean energy switch' initiative that offers collective bargaining power with smaller green energy suppliers.
Energy prices: how are the big firms making so much money?
31 July
Gas and electricity firms are expected to double their profit margins, according to the industry regulator Ofgem. It has estimated that energy companies will make an average £106 from each customer over the next 12 months, which is up from £53 last year and up from £9 five years ago. The Big Six – British Gas, EDF, E.ON, SSE, Npower and Scottish Power – are under pressure to cut prices after millions of households struggled to heat their homes last winter. So why are their profit margins so big?
Failure to pass on savings to customers
The estimated hike in profits comes as wholesale prices, paid by the big firms for electricity and gas, have fallen to a near four-year low. "Given the rise in margins and that wholesale costs haven't exploded over the past four months as some expected, we would expect some companies to be offering lower prices," Dermot Nolan, chief executive of Ofgem, told the Financial Times. "But when we look at margins, we see them broadening even though there is scope for greater competition, leading to price cuts."
Fear of Miliband's bill freeze
Some energy executives have blamed their reluctance to cut prices on Ed Miliband's pledge to freeze bills for 20 months if he wins the next general election. Peter Lilley, a Tory MP who sits on the Energy Select Committee, told the Daily Mail that Miliband's plan has "backfired". With the shadow of a possible Labour government, bills are likely to be artificially inflated all through next winter, says the Mail. Some firms are also said to be spending money on stockpiling gas and power now to protect them against the possible impact of a price freeze.
Government failing to confront energy firms
In turn, Labour blames the Government for failing to stop energy companies from ripping off customers. John Robertson, a Labour MP who also sits on the energy select committee, described energy firms as "a law unto themselves" and said they were hiding behind the general election. "This is something that Ofgem and the Government should be looking at, but they seem to be absolutely inept," he told The Times. "The rest of us are paying through the nose for it and a lot of people can't afford to."
Consumers failing to switch
Trevor Sikorski, from consultants Energy Aspects, told BBC Radio 4's Today programme that consumers are as responsible for the state of the market as the energy firms themselves. Consumers "generally don't switch very much", he said, and "we're not sensitive to price changes when they happen, which isn't encouraging competition".
Ofgem figures 'inaccurate'
Angela Knight, chief executive of Energy UK, the industry trade body, has described Ofgem's £106 profit margin prediction as "inaccurate" and "misleading". She told the Daily Telegraph that Ofgem has drastically revised previous estimates, raising "big questions" about those published this week. For example, in January last year, the regulator initially predicted that firms would make a £120 annual profit, but then revised down the forecast to £28 after changing its methodology. Companies made a £53 profit margin that year, half Ofgem's original estimate. The regulator has admitted that it has significantly changed the way it compiles the numbers, but stands by its latest figures.
In the past few weeks half of the Big Six energy firms haveannounced a prize freeze. But, what initially sounds like great news could meanyou are still getting a poor deal. Here’s what you need to know.
Who’s frozen their prices?
E.On, British Gas and SSE have all pledged to freeze prices ontheir standard tariffs for the winter. British Gas has said it won’t increaseit’s standard prices until at least March 2017, while the other two are holdingtheir standard tariffs at their current levels until April 2017.
Great. Does that mean I’m on the best deal?
Absolutely not. Customers on standard tariffs are already“massively overpaying,” Martin Lewis, the founder of MoneySavingExpert.com toldTheSun.
“If you are on British Gas’ standard tariff, like all bigsix standard tariffs, you are already massively overpaying. For someone ontypical use you’re paying £1,040 a year,” says Lewis. “If you’re willing tochange company, the savings are getting on to £180 a year at typical usage, andmuch more for many customers who have bigger bills.”
This is a good time to switch providers as the announcementof a prize freeze by the big six companies is normally just a nice way ofsaying, ‘we’ll be putting prices up in the spring’. Especially, as risingwholesale prices and a weak pound mean energy firms are facing bigger costs.Switch and fix now and you can delay paying those increased prices.
Should I move to a small challenger supplier?
You may want to think twice about moving to a smallsupplier. Last week GB Energy Supply went bust and more small suppliers areexpected to follow suit.
“We are facing a perfect storm. Many small suppliers haveonly recently come into the market and have only ever experienced relativelylow wholesale prices,” says Mark Todd, from energyhelpline.com in TheTimes. “However, since March this year, the price of wholesale electricityis up by about 50% and wholesale gas by about 40%. I don’t think we will haveseen the last supplier go bust this winter.”
If your energy supplier goes bust you won’t be cut off,Ofgem has promised to find everyone another supplier within 14 days. But, youcould be moved onto an expensive standard rate and there is a chance you couldlose money if you have built up a large credit balance and don’t provide aprompt meter reading to show what you are owed.
Ofgem recently brought in a new rule that means creditbalances are secure – you’ll be part covered by the company that takes overyour account, and part by a new levy on all the energy firms to create a safetynet fund. But, it’s not clear how long it would take to get your money back. GBEnergy customers are believed to be owed around £25m.
Building up a large credit balance happens when you pay bedirect debit and overpay each month. It is best avoided as that money rarelyearns a decent interest rate. If you have built up a credit balance contactyour supplier and ask for a refund.
How can I get the best deal?
Finding the best energy deal is a quick, painless process.Just grab a recent bill and head to a comparison website such as uSwitch.com orComparetheMarket.com. Tap in your details and it will show you the best deals.
These days the top of the tables are dominated by smallenergy firms, but after GB Energy’s collapse you need to do your homeworkbefore signing up to a small supplier. This winter you might be better offsticking with the best deals offered by the Big Six, or a small company that iswell-established, such as Ovo.
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