Consumers in a power struggle

Sparks are going to fly as the electricity revolution unfolds. Regional energy

companies are now allowed to go looking for business on rival turf: but who will

really benefit - the householder or the corporation?

We are on the brink of a revolution - if only we could make sense of what it all means. For the first time ever, the old power distinctions are coming apart. Are we courageous enough to meet the challenge? Those in power are intent on keeping us in the dark as to what the true position is. But if we can decipher the truth behind their claims, millions of us could benefit from the change.

This call to the barricades follows this week's announcement that electricity suppliers will be allowed to compete in each others' regions. A similar process in the gas industry has been in force for months.

Eastern Energy, Scottish Power/Manweb and Yorkshire Electricity are entering the market right away. They will be competing with British Gas Trading, which now supplies electricity, too. Customers in towns such as Chester, Hull, Motherwell and Norwich can now choose any one of the four companies above to supply not only their electricity but also their gas.

When the region-by-region electricity roll-out is completed in June next year, there will be 16 different power suppliers to choose from, all operating throughout England, Wales and Scotland.

But the promise that competition will liberate the market and slash domestic bills began to sound a little hollow after it emerged that the savings to customers may be as little as 40p a week. Moreover, the way each supplier is allowed to price electricity means that would-be consumers are unlikely ever to experience freedom from the shackles of monopolistic control.

The dream is that competition will drive prices down. The Office of Electricity Regulation (Offer) says: "For typical domestic consumers, their electricity supplier will be charging among the highest prices in the area. Thy can save by switching supplier."

But, as our table shows, the savings on electricity alone are pretty small. Direct debit payments are where the biggest savings are to be had. Even here, Offer's figures suggest the biggest saving possible for an average user is just pounds 21 a year or 40p a week. This would apply for electricity users switching from Scottish Power/Manweb to British Gas Trading and means a cut of about 8.5 per cent in the annual bill.

Benet Middleton, who heads policy research at the Consumers Association, predicts savings throughout the country at between 5 and 10 per cent.

"It is nowhere near the savings that we saw on gas and that's because of the structure of the industry," he says. "Until there is more competition in electricity generation, as opposed to sales, it is unlikely we will see anything like the savings in other utilities."

John Over, Yorkshire Electricity's marketing director, believes domestic electricity prices are about as low as they are likely to get for some time and thinks competition will centre on service instead.

He says: "In the gas industry, there's more of a profit margin to attack and therefore a bigger discount to be given. Clearly, we've got competitive electricity prices. I think competition will impact not only on price, but also on the range of services you expect to get."

The real significance of this week's move may be that it is now possible for some consumers to shop around for a combined package, getting both gas and electricity from a single supplier. Some offer an additional discount for these so-called "dual fuel" customers. For example, a Chester consumer buying his electricity from local supplier Manweb and his gas from British Gas would pay an average of pounds 584 a year for the two services together. Taking a dual fuel deal from Yorkshire Electricity would cut his bill by pounds 49.

But price is far from the only issue.

Linda Lennard, senior policy officer at the National Consumer Council, says: "People should be clear on the contract they are entering into. How long does it last, and is there a penalty if they decide to swop suppliers in the middle? What are the terms and conditions applying on how they want to pay?"

Ms Lennard is also concerned that it is direct debit customers who look like getting the best deal. She says: "We want to see people on pre-payment meters and those who may have difficulties paying bills able to save as much as better-off consumers."

In the case of gas there were some notorious cases of high-pressure selling, and consumer groups warn against signing anything until you have seen full details and properly understand the deal on offer.

Mr Middleton says: "There was a purposeful strategy of using `confusion marketing' techniques to make it very difficult for people to make real comparisons. We would like to see clear information provided that consumers can use, because it's going to be a very difficult process to work it all out.