Simon Read: The sad tale of high energy prices and mis-selling continues
Simon Read is Personal Finance Editor at The Independent. He edits the Saturday Your Money section and writes the Daily Money column and Wednesday’s Midweek Money section in i newspaper. He also writes for the news and business pages of the Independent and i newspaper and is a regular money commentator on TV station London Live. He has won numerous awards including Consumer Finance Journalist of the Year.
Saturday 07 April 2012
Energy firms have angered a lot of people in recent months. Rising prices were followed by soaring profits and all the while many of the Big Six firms were put under investigation for unfair charges or widespread mis-selling.
But just when you thought things couldn't get any worse, it's been a week of slapped wrists and potential fines for the firms. On Monday French-owned EDF Energy was rapped by Ofgem for the poor way it dealt with customer complaints. The Energy Watchdog reported that more than half of EDF's customers who made a complaint last year were dissatisfied with how it had been handled. The figures left the company with the worst record for complaints-handling of the Big Six for the second year running.
Then – on Wednesday – Ofgem launched a new investigation into mis-selling claims against E.on, the only Big Six energy supplier which continues the odious practice of flogging its gas and electricity on doorsteps. The watchdog is already investigating the sales tactics of three of the Big Six firms, Scottish Power, SSE and nPower. And its recent investigation into EDF – them again! – resulted in the company agreeing to pay out £4.5m after staff were found to have made misleading claims to customers.
Recently I've spoken to several of the bosses of the Big Six energy firms and they all seem honourable men, keen to point out what they're doing to help customers who are struggling to meet the cost of heating their homes.
But tinkering with tariffs or bleating about the costs of hitting future investment targets do little to help those who are still in fuel poverty.
Research from uSwitch published on Thursday suggested that some four million households are at present behind in their payments to the Big Six. The average amount owed, according to the comparison site, is £131. To the bosses of the energy firms – who command six-figure salaries – the odd £131 is chicken-feed. But to the families having difficulty paying their bills, that amount can feel like a fortune.
The energy firms say they now are much more prepared to talk to struggling customers and help them to find ways to pay their bills. That's to be commended. But it doesn't deal with the problem.
The fact remains that millions struggle to pay bills. That can lead to disastrous conclusions. Those that choose to cut back on heating their homes to save costs are at risk of adding to the growing number of excess winter deaths because of fuel poverty, estimated at 8,000 a year in a recent report.
Others that turn to expensive short-term lenders to pay their bills can quickly end up in a debt spiral, leaving them unable to afford to pay the interest on their debts, let alone be able to pay their new bills.
One solution – supported by Energy Minister Ed Davey – is collective purchasing. But the Big Switch campaign by consumer organisation Which? to get cheaper home energy deals has foundered as energy firm after energy firm refused to take part.
The consumer group has persauded 250,000 people to sign up, demonstrating the massive demand for better deals. So it was pleasing this week to see ethical supplier Co-operative Energy agreeing to get involved. The Co-op – which was launched last year – said it would take part after Which? agreed to allow suppliers to use their existing tariffs in the bid process, which will take place later this month.
A reverse auction will be held with Which? informing its supporters which deal looks best and then making arrangements for them to switch to the better tariff.
The consumer body has been criticised for planning to make a reported £40 for every person who switches under the scheme. Indeed a rival switch campaign has been set up by comparison website Energyhelpline, with a promise to undercut the charges from Which?.
But if the campaign does help people switch to a better enery tariff, it will be worth it.
A similar more localised scheme which has garnered support from Mr Davey is a collaboration between not-for-profit organisation thePeoplesPower.co.uk and the Grand Union Housing Group.
It aims to benefit households who might not be used to shopping around on the internet, rather than then 80,000 or so who already switch supplier every week.
The community company charges only £2 for switching and reckons it needs only 10,000 or so to be able to negotiate keener deals with suppliers.
Mike Shamash, founder of thePeoplesPower said: "Our sole aim is to get people the cheapest gas and electricity."
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