Poor get raw deal from new gas firms

Gas companies are penalising poorer customers in violation of the 1986 Gas Act, according to documents filed with industry regulator Clare Spottiswoode by a consumer lobby group.

Two reports sent to Ofgas this weekend indicate that low-income gas users are getting a rawer deal than their well-heeled neighbours in the test markets of Cornwall, Devon and Somerset, which have already been deregulated.

The companies offer big discounts on British Gas's standard rates for people who pay by direct debit, mostly middle-income families. But those who use pre-payment meters - largely the elderly, single parents, students and the unemployed - get much smaller savings. In three instances there is no benefit to pre-payment customers for switching from British Gas.

"It's our interpretation that this is undue discrimination," said Trevor Houghton, research co-ordinator with the National Right to Fuel Campaign, which argues that the tariffs help companies cherry-pick wealthier customers. "It's telling them [pre-payment customers]: 'We don't want you.' "

Pre-payment meters are most often installed by customers who are struggling to pay off existing fuel debts or those on fixed incomes who wish to budget the amount of gas they use.

Two-fifths of British families spend 8 to 10 per cent of their disposable income on fuel. One million of them use the pre-payment system.

In some cases the difference between the two tariffs has been as high as 41 per cent, and a survey last week by the Gas Consumers Council found the average gap was 26 per cent.

Right to Fuel said the unbalanced rates were a sign that the companies are flouting the Act, which requires that public gas suppliers do not show "any undue preference to any person or class of persons when fixing tariffs".

Both Right to Fuel and the GCC admit that pre-payment meters are more expensive to administer than direct-debit systems, partly because the Quantum meters provided by British Gas were over-engineered for the simple tasks they are required to accomplish. But they do not see why the spread should be any wider than the 14 per cent extra charged by British Gas.

An inquiry by Ofgas last year found that the differences in British Gas's charges were justified. "If BG can do it then the others can as well," said Michael King, Right to Fuel's chairman.

The council shied clear of claiming that the public gas suppliers had contravened the letter of the legislation, but Sue Slipman, the group's director, said: "These pricing policies show a disregard for the spirit of competition."

Although the GCC does not believe it can file a formal complaint about the tariffs, the rates could be used as evidence to back up a future referral if it feels the companies are not meeting their social obligations under the Act.

The companies counter that they had little experience with pre-payment meters when the competitive experiment in the consumer market began last year, and that in some cases the full costs of the system were not apparent when they set tariffs.

Ofgas lent support to that view, saying it expects the situation will naturally improve. "Suppliers, who have so far been unable to offer discounts for pre-payment customers, will see the benefits of doing so as the market matures," it confidently forecast.

Midland Gas, which in the latest league table has the largest gap - 38 per cent - argued that its rates were still lower than those charged by British Gas. "Both Ofgas and the GCC are happy with our tariffs," said a spokesman for the company.