Energy suppliers ‘failing’ to change

Wednesday 23 November 2011

Watchdog says energy companies are not doing enough to end previous bad practices

Consumer Focus, the watchdog, has accused energy companies of failing to end bad practices which confuse their customers and cost them money.

In a letter to Ofgem, of which Times Money has seen a copy, the watchdog says that despite calls to reduce the number of tariffs on the market, the big six energy companies have launched 74 new ones in 2011. Scottish Power was the worst offender, with 20, followed by E.ON with 18.

The energy companies also came under fire for continuing to overcharge customers wishing to pay by cheque as opposed to direct debit. The extra cost of paying by cheque for an average dual fuel consumer ranged from £15 a year with Scottish & Southern Energy (SSE) to a massive £135 for Scottish Power.

Even after allowing for the impact of energy companies’ prompt payment discounts, which reduce the differential between cheque payment and direct debit, Scottish Power customers were still paying £70 a year more, on average, for the privilege of paying by cheque.
Consumer Focus said: “Scottish Power appears to be operating a pricing policy that results in the ‘cherry picking’ of direct debit customers - who represent a lower debt risk - to the detriment of those who pay by cash or cheque.”

Although five of the big six energy suppliers have now agreed to cease doorstep selling, E.ON is still using this heavily-criticised approach to sign up new customers. Consumer Focus said that in addition to ignoring its call to end face to face sales, E.ON was not making its cheapest tariffs available to customers signing up on the doorstep.

Another area where the watchdog felt little progress had been made was that of discount deals which weren’t as good as they were touted as being. For example E.ON introduced a new ‘Energy Fit’ tariff in October which promised two free months of energy, equal to an 8.3 per cent annual saving to customers willing to pay by direct debit.

But as Consumer Focus pointed out: “The small print made clear that that any customer signing up to the tariff would forego E.ON’s standard 8 per cent annual discount for paying by direct debit.”

It added: “The marketing message would have been more transparent had it been advertised as a 0.3 per cent saving over standard direct debit rates, plus the additional extras.”

Consumer Focus said British Gas had the most complicated discount structure of all and that customers were unlikely ever to receive anywhere near the maximum advertised discount.

The watchdog concludes: “It has become increasingly clear that the lack of consumer trust in energy suppliers remains a major issue.”

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Article from The Times | Money Section (http://www.thetimes.co.uk/tto/money/consumeraffairs/article3235885.ece?CMP=EMCeb1)

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