All power to consumers, but will they be in control?
Sunday 11 January 1998
One golden rule is that customers should be able to save substantially by shifting from British Gas. Even BG itself admits that the regulatory controls imposed by Ofgas prevent it from being price competitive. "British Gas has price controls placed on our gas prices until competition is deemed to be established," says a spokesman. Until then, consumers stand to save between 20 and 30 per cent by moving to a competitor. Maximum savings are available to households willing to pay monthly by direct debit.
Large parts of the country are already free to buy gas from the 21 registered suppliers now in the market, although not all companies operate in all areas. To date 283,000 households have switched from BG. The parts of the north of England that cannot already buy from an open gas market will be able to do so at the end of next month, the East Midlands can do so a month later, the West Midlands at the end of April, and East Anglia and the Home Counties, including London, in May.
Savings should also be available when electricity is opened up, though these may be smaller. However, progress towards opening up the electricity domestic supply market is proving more difficult than with gas. Offer, the electricity regulator, admits that it is now unlikely to meet the target date of April to open up the first regions - those supplied by Eastern, Manweb, Seeboard and Yorkshire.
Most, if not all, regional supply companies will sell electricity across the whole of the country, along with many of the companies already selling gas in the deregulated market.
Trying to establish the cheapest supplier for gas and electricity will be complex. Sharon Dee, principal policy researcher with the Consumers' Association, says: "It is very, very difficult. In some areas it is possible to buy gas from any of 17 suppliers, and that means 17 sets of apparently junk mail through your letter box. Each is comparing information on a different basis and each is making different claims. Once electricity competition comes on as well, with new incentives, it will be very confusing."
The pricing structures offered in the gas market are complex, varying according to region, consumption and method of payment. But this is simple compared with the structure expected with electricity. British Gas alone will use 336 different tariffs for its electricity supply business. And where Transco, the now separated gas distribution arm of BG, is using a similar gas transportation charge across the country, there will be enormous variations in regional prices in the electricity market. Electricity will be much more expensive in the outer regions of Britain, compared with the centre.
Some of the big supply companies, notably BG and Northern Electric, are offering additional discounts to consumers who opt to purchase electricity and gas from the same supplier. But Yorkshire Electricity, for one, has issued a blunt warning to consumers not to be fooled by such arrangements, which, it says, will cost them more.
The signs are that the marketing of gas and electricity will be cut-throat. Initial liberalisation of the gas market in the South-west saw pressure selling on doorsteps, which led to Sweb dismissing 10 sales staff after intervention by the gas watchdog. And some gas supply companies accuse disreputable intermediaries of continuing to use pressure selling and making misleading claims.
Some intermediaries, though, are entirely reputable. They include the Automobile Association, Saga, which specialises in providing services for the retired, and the TUC, through its Union Energy offshoot. Each is offering members a range of savings and offers, which in the case of Union Energy includes the offer of pounds 200 of redundancy cover for union members who sign up for either gas or electricity supply contracts, or pounds 400 to members who sign for both.
It has also been rumoured that several supermarket chains were keen to supply gas and electricity, or become brokers on behalf of supply companies, but none has so far announced plans to do so. Sainsbury's and the Co-operative Wholesale Society (CWS) said they had no plans to move into this market, while Asda declined to comment.
Consumers may even end up complaining that there is too much choice. There are, though, a few simple rules:
q Refuse to sign any supply agreement quickly - compare prices, having examined household bills to assess usage
q Consider switching to direct debit as a means of payment.
q Ask how long low prices are guaranteed and whether there will be a penalty for switching to another supplier as many companies are thought to be offering loss leader prices that will rise substantially in coming years.
q Obtain copies of two recommended free booklets. One, from Offer, the electricity regulator (0121 456 2100), is called "Customer Choice in the Electricity Market"; the other one, produced by Which? magazine, is from Ofgas (0800 887777).
After that, get the calculator out and hope for the best.
Next week we look at the opportunities to make big savings on your phone bill by switching company.
Claims and counter-claims as the battle for power heats up
Beacon Gas (0500 223355) says its prices are both competitive and sustainable. They are 18 per cent below those of British Gas.
British Fuels Gas (0845 122 2000).
British Gas (0645 668866) admits that because of regulatory controls it is not price competitive for gas supply, though it claims it is a match for electricity suppliers. "We don't compete on price, we compete on value for money," it says. There are price reductions for customers who buy both electricity and gas from BG and a 15 per cent discount for payment by direct debit.
East Midlands Electricity (0500 240500) is selling gas at prices 15 per cent below BG standard prices and electricity prices are "very competitive". There is an annual pounds 10 saving for direct-debit customers.
Eastern Group (0345 226226) is selling gas at prices 20 per cent below BG standard prices, or 25 per cent if payment is by direct debit.
Midlands Electricity (0345 011000). "We are supplying gas at prices 30 per cent cheaper than BG and our electricity prices are some of the cheapest in the country, and will be cut further in April."
Northern Electricity (0345 199696). "We expect our prices to be among the most competitive."
Norweb (0800 555888).
Scottish Power (0800 400200).
Swalec (0345 700100).
Union Energy (0800 027 9000) is a broker for Scottish Power for trade union members. It guarantees that for five years it will be among the five cheapest gas and electricity suppliers.
Yorkshire Electricity (0800 073 4343).
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