Simon Read: Energy firms must do much more to regain our trust
“If a smaller supplier can cancel price rises because market fundamentals change, why can’t others?”
There was some positive news at last this week from the energy companies. First the mighty British Gas agreed to simplify its charging structure to just two tariffs. Surprisingly they won't be giving customers the choice of – as one wag put it – freezing or going bankrupt.
Instead the firm is cutting back its tariffs to a simple choice between variable and fixed. It also promised to provide customers with a breakdown of all the costs that make up their bills.
It's about time the firm – which remains Britain's biggest energy supplier – started to think about the way it treats customers. This summer alone it increased gas prices by 18 per cent and electricity prices by 16 per cent. That move cost its customers an average of an extra £200 a year.
It's also worth bearing in mind that more than 70 new tariffs have been launched this year by energy firms. That leaves us being confronted with a choice of 400 different tariffs. I know we should welcome choice, but not when it becomes too complex and difficult to choose.
Even using the online comparison and switching sites doesn't really help decipher which is the cheapest option, especially as you know that just around the corner is a new plan which is likely to be better value.
The new British Gas tariffs – which were launched immediately on Thursday for new customers and those already on a variable scheme – should help make it simpler to work out fuel costs. The company's move followed Scottish and Southern Energy's announcement last month that it was reducing the number of tariffs it offered by a fifth.
However, as always, there's bad news for some. Those on low rates are likely to see a price hike when they switch to a new tariff. Also, there will remain different prices according to factors such as whether you pay by direct debit or not.
At the other end of the energy suppliers' market is the relatively tiny Ovo Energy. It has just 69,000 customers compared to the millions that each of the big six firms have. But this week it scrapped plans to increase prices by 3.5 per cent in January.
The reason? Boss Stephen Fitzpatrick explains: "Since we announced the planned increase in our variable prices on 26 October, wholesale costs have fallen. In response to this change in the market we will not go ahead with the planned increase."
The timing of the announcement – just after British Gas' new tariffs were revealed – suggests a possible publicity stunt. But even if so, it's still a very positive move for customers. Wholesale prices have been falling recently, so why shouldn't suppliers look at the possibility of cutting prices? After all, they are very quick to respond to wholesale price increases.
It's a point taken up by Audrey Gallacher, director of energy at the watchdog Consumer Focus. "A smaller supplier such as Ovo may be able to react more quickly, but it obviously can't operate on the same economies of scale as its much larger rivals.
"But if it can cancel price rises because market fundamentals change, why can't others? When wholesale prices fall, you would expect companies fighting in a truly competitive market to start cutting bills."
We're clearly still some way away from a truly competitive market, but putting this week's announcements together point to a growing recognition that customers are reaching breaking point, and won't keep on accepting the seemingly endless increases in charges and terrible service we've experienced in the last couple of years.
Indeed British Gas managing director Phil Bentley admitted that the firm "had not made it easy for customers" and that there was a public loss of trust in the energy industry. We've seen some tiny moves to restore that trust this week. We will watch with hope for some more.
You're safe to drive or not, regardless of your age
It's not just politicians that are out of touch with normal folk, it seems. Otto Thorensen, director general of the Association of British Insurers, this week joined the ranks of the bonkers.
As part of the laudable Road Safety Week he called for the introduction of restrictions on young people from driving at night and in the early hours. Thorensen's heart was in the right place – he was putting forward the suggestion as a possible way to help reduce road deaths – but he really should have thought through his proposal.
Banning drivers aged 25 and younger from driving at night would be preposterous. The simple fact is you're either safe to drive or not, irrespective of age or the time of the day.
It's true that younger people make up a disproportionate number of road casualties. Every day 18 die or are seriously injured on our roads. But there are much more sensible solutions that the insurance industry could back. A crackdown on those caught drink driving makes sense. As does tougher tests for prospective drivers. But by the same token it's worth remembering that plenty of experienced drivers have bad habits too, so why not introduce regular testing for all?
What looks fascinating is the growing number of insurers turning to telematics. This is the black box that sits in your car and measures how you drive. The AA is planning to launch a telematics-linked insurance policy in January, while the Co-op has offered one since March.
Early results from the Co-op are very encouraging. Its Young Driver scheme measures such aspects as speed, braking and cornering. It then gives discounts to those who consistently display good driving habits. The firm says nine out of 10 people on the scheme so far have qualified for the discount, at an average £100 off the cost of a policy.
Giving people rewards for good driving may seem simplistic, but it's clearly effective. The bonkers brigade at the ABI would do better to encourage more take-up of telematics than restricting young drivers.
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