Misselling is only the beginning of the energy companies’ sins


Huw Irranca-Davies MP (Labour, Ogmore) is the shadow energy minister

The finding’s of today’s energy and climate change select committee report on the misselling of gas and electricity deals on the doorstep are hard to disagree with.

Greedy-fat-catIt is simply unacceptable that customers could be forced into agreeing to switch energy supplier – with complex tariffs and unclear financial benefits – as a result of pressurised selling on their doorstep.

When you switch energy supplier (bearing in mind that many don’t), you expect to receive good advice and make a saving each month or each quarter, not to find your bills are even bigger than they were before.

Yet that is exactly what many found. The select committee were told up to 40% of those who switched suppliers on the doorstep did not end up with a better deal. That is simply unacceptable.

It’s all well and good Energy UK director, Christine McGourty, stating:

“The rules around doorstep selling are tighter than ever.”

That doesn’t rectify the wrongful actions of salesman up and down the country who were simply in search of a quick buck. Scottish and Southern Power has already been prosecuted for the behaviour of its salesmen, and Ofgem is currently investigating four of the ‘big six’ energy companies over doorstep misselling.

SSE’s chief executive even received a bonus while his company was found guilty of misselling – the public will rightly be angry, and wonder whether the lessons have really been learned.

These energy companies need to look again at their operations, and ensure their slick sales tactics are dropped and that consumers are given the information they need to ensure they sign up to a tariff that is financially beneficial to them, and not to the commission-led salesmen.

But the problem of misselling was only one item addressed in this report. The report was the committee’s response to Ofgem’s review of the retail energy market, which was published in March 2011.  The regulator said at the time it wanted to “break the grip” of the big six energy firms, which between them have 99 per cent of the domestic energy market.

To achieve this, Ofgem wants energy companies – the big six – to auction up to 20% of their electricity generation output to increase price transparency and allow smaller players, particularly at the retail end, to enter the market. But auctioning just 20% of the power energy companies generate is unlikely to have any really effect, and it certainly won’t solve the problem of the vertically-integrated big six or break their grip on the domestic energy market.

Without greater effort by Ofgem and the government to create space for new energy players nothing will change; people will remain tied to one of the big six, and will continue to see their energy prices rocket with double-digit increases.

I want to see radical reform of the energy market to generate increased competition and greater transparency, so people know they aren’t being fleeced. We all need to know the price we are paying for our energy is fair.

That is why Labour believes – going far beyond what the government have in their Electricity Market Reform (EMR) July 2011 White Paper (pdf) – we should look at a pool system, where the energy companies have to sell 100% of their power into a pool and anyone, not just the big six, could buy power from there at the pool price.  It’ll be clear what price the energy is bought at, and therefore much clearer to know whether the price consumers pay is fair.

The current regulatory system has allowed energy companies to keep retail, trading and generation in one business, which maximises the return for shareholders, and can conceals costs and profits. That is just plain wrong. We need an energy market that not only provides the much needed investment, but one that ensures the price to consumers is designed to be fair, honest and transparent from the outset.

It’ll take some time before a new energy market regulatory system will come anywhere near to ensuring transparency for the consumer; but at a time when household bills reach record levels, industry experts argue that the wholesale price of energy is still lower than they were three years ago during the financial crisis, and many this winter will be forced to choose between eating and heating, the government must act now.

The energy and climate change secretary, Chris Huhne, has certainly acted. He’s cut funding to Warm Front, and his flagship policies, the Green Deal and Energy Company Obligation, are stuck in the parliamentary rut, whilst he tells consumers to simply switch energy suppliers to find cheaper deals.

But at this moment – when 99% of consumers are with the big six, who are one by one raising their energy prices by double-digits – only a referral to the Competition Commission can give bill payers confidence that they aren’t being ripped off, and to allow energy companies to defend their pricing strategies.

Regulatory reform is the long game, but a referral to the Competition Commission – who could provide an interim report in short order – is the only immediate answer to addressing the real concerns we all have over the drastic price rises in energy.

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  • Anon E Mouse

    Glad to see Labour MP’s following the government’s lead on this stuff…

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  • Leon Wolfson

    I don’t see any political action to actually hurt the energy companies over this. At a time when Mouse’s buddies in goverment are sitting back, slashing funding for energy and ignoring energy price rises in favour of saying “oh switch provider”…ah yes, look, people offering switches. Which increases the bills.

    Mouse is in favour of mis-selling, by his own logic paths.

    Anyway; back in the real world, THIS would be a good case for emergency legislation!

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  • Mr. Sensible

    The government’s comments to change energy supplier are about as useful as suggestions to change water supplier…

  • Kevin leonard

    Lets cut out the bullshit and admit the privatisation of the utility companies was a waste of money and time(as we all said when it happened) giving far too much power to the energy companies over their customers.Profit motivated public utilities will never produce affordable heating and light to consumers it is time to buy back (at the initial sell off price) all the electric and gas companies.
    Any profit generated could then be channelled into paying off the massive debts we allowed the bankers to run up.
    To hell with the outcry of unfair and you can’t do that it is common knowledge that the current system only serves the rich and powerful at the top of the pyramid, the time has come to call for real radical action to take back our own country.

  • Ken

    12 years ago when I sold energy door to door the average saving was £80 over the year. Now your lucky to save £20 per year if you switch suppliers. I blame the companies for setting silly sales targets and not offering greater savings at the door step. Customers have lost all confidence in this type of selling.

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  • http://talktalk Ken walker

    enough is enough what with the banksters competing with the energy suppliars to rape the public can it really get worse nationalise all in one foul swoop deficit gone in one time for action

  • http://talktalk Ken walker

    words are no longer enough

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  • http://footyhut.com Shaun Thomas

    I wish you’d do more research in to the families and environment that have suffered in the United States because of the fracking for Gas.

    Perhaps then you wouldn’t wage a war against the people in control of our traditional energy sources when the health of the people you represent is more important. I think your stance on the cheap extraction of Gas from our area is lunacy.

    Your own website states
    “Huw strongly believes that everything should be done to help any miner and their families affected by such injuries and would like anyone affected to contact his constituency office for help in this.”

    Well how about stopping it before it starts because the health problems associated with fracking are far worse. I for one will not vote for you because of this matter and neither will any adult in my family.