Simon Read: Why rich energy companies' talk of trust leaves me cold
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 18 February 2012
Who do you trust? Vincent de Rivas perhaps? He's the boss of EDF Energy, which on Thursday revealed UK profits growth of 8.5 per cent. It's great to see companies doing well and EDF's £1.6bn operating profit is a tribute to its solid management and commitment to providing great returns to shareholders. But the company's 3.7 million British customers are not forgotten by the firm, and that's where Mr De Rivas comes in. In an interview this week he said he is determined to rebuild trust in the company. In fact he was so keen to emphasise his point he used the word "trust" 61 times in an hour-long interview. So he must mean it.
Why was he so insistent on using the word trust? We only have to look at EDF's record in Britain to see why. The company is one of the Big Six energy firms which have sewn up the gas and electricity market between them, providing fuel to more than 99 per cent of British homes. Between them, they have doubled energy bills in the past six years from around £600 to £1,200. In the process they've forced some 5.5 million households into fuel poverty, when their fuel costs account for a tenth or more of their income.
The firms are the subject of two investigations by Ofgem, the energy watchdog, into poor customer service and mis-selling. They are accused of acting as a virtual cartel, putting up prices quickly when wholesale energy costs rise, but failing to pass on cheaper prices to customers.
They are also accused of offering a range of tariffs so confusing that many people find it impossible to work out which is the best deal for them. This week undercover researchers accused EDF salespeople of using dubious sales tactics to flog expensive tariffs.
A survey published today names EDF as the second-worst UK company for customer service, only beaten by energy rival Npower. Siegel+Gale's Global Brand Simplicity Index accuses the two power firms of being "especially vague and deceptive in their messaging and pricing".
EDF's bumper profits announced on Thursday work out at £427 for each of the British households that use its service. Meanwhile in a letter published in The Independent yesterday, the same day we carried details of EDF's profits, Martin Lawrence, head of the firm's energy sourcing and customer supply in the UK, said: "We know there is much to be done to restore trust in our industry."
There's that word again. Trust. In this column last November I commented on an announcement by British Gas that it would simplify its tariffs in an attempt to restore the public loss of trust in the energy industry. At that time I wrote: "We've seen some tiny moves to restore that trust this week. We will watch with hope for some more."
With British Gas set to announce UK profits of £550m next Thursday, I see no signs of trust being restored in the industry, despite Mr De Rivas' efforts. The Independent has been running a Fair Energy campaign for more than a week, yet none of the energy bosses has agreed to answer our questions about prices in a face-to-face interview.
We're calling for a windfall tax on excessive energy profits and for the money to be used to help in the fight against fuel poverty by making homes more energy efficient. The problem is the high number of deaths, with an estimated 3,000 people dying each winter because of fuel poverty and not being able to afford adequate heating in their home. That's a figure that should shame us all.
When I interviewed the Liberal Democrat peer Lord Ezra this week, he reminded me that the energy companies sell an essential utility. For that reason they must start to put their customers first rather than their shareholders. When they start to demonstrate a real commitment to customers then, and only then, can we think about starting to trust them again.
It's not just energy firms that need to work hard to regain our trust: savings institutions need to as well. I'm reminded of this as my email inbox starts to choke with new ISA deals aimed at reminding people to make use of their 2011-12 Individual Savings Account tax allowance before it disappears on 5 April.
While it's good sense to put your savings in a tax-free account, it hasn't been terrifically good sense to open any of the high-paying cash ISA accounts in recent times, because most of the market-leading accounts come with introductory bonuses or other tricks that leave the unwary with negligible interest on their stash. In fact many former top dogs now offer interest of as little as 0.1 per cent.
The fact that savings institutions – building societies as well as banks – trick people into accounts that pay virtually no interest is wrong.
A quarter of the 129 instant or easy-access cash ISAs being offered have an introductory bonus of normally a year. But when that 12 months is up, almost all these accounts are going to be useless once the bonus is taken away.
For that reason, if you opened an ISA a year ago, or even two years ago, I urge you to check the rate you're getting now. It may have been a mouth-watering 3 per cent or so when you opened it. By now it could be 0.5 per cent or less. Worthless, in short.
And if you're looking around for an ISA to use before the next financial year, look closely at the terms and conditions. One fixed rate offering 4.2 per cent over three years, only pays 0.5 per cent before April, for instance.
Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk
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