The big six energy suppliers’ recent round of price rises have added £630 million to British household energy bills, with the average annual tab rising by £63.
The energy suppliers announced the price rises in quick succession last year. At about the same time, the energy regulator Ofgem launched an investigation into the industry. Its findings are due this month and one possible outcome is that the industry be referred to the Competition Commission, which has the power to break up large companies.
The inquiry was initiated after the regulator discovered that company profit margins had risen by 38 per cent to £90 for each household on a standard dual-fuel tariff. However, price is not the only cause for complaint by customers, who are calling for an improvement in customer service standards.
Times Money readers frequently write to us about problems with their energy suppliers and from these we have identified the five key areas where the industry needs to improve.
Customer service The big six received 4.6 million customer complaints in the past financial year, according to Consumer Focus, the consumer champion, dwarfing the number of complaints directed at banks.
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Audrey Gallacher, head of energy for the group, says: “Customers are frustrated that suppliers often fail them on the basics yet they feel they have to pay a premium price for their energy.
“Consumers simply don’t have confidence that they are paying a fair price, that the market is working as it should or that they are getting good enough customer service.”
Independent research by Ofgem published last year showed that only a quarter of domestic energy customers were satisfied with how their complaint was handled by their supplier.
David Sharp, a British Gas customer, was one of the unsatisfied customers. It took ten visits from engineers to finally fix his boiler. Mr Sharp was billed for a £50 call-out charge and he and his partner had to take time off work to receive the visits from engineers. He feels that his complaints to the company, dating back to January, fell on deaf ears.
“I tried to escalate the issue via various complaints, which never got dealt with or responded to,” he says.
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A spokesman for British Gas says: “We contacted Mr Sharp to apologise for the inconvenience and the delayed response to his e-mails, which was due to the exceptionally high call volumes we experienced this winter.”
British Gas has cancelled the £50 call-out charge and offered Mr Sharp £180 as a “gesture of good will”.
Faulty meters Internal documents from the National Grid showing that there could be millions of people overpaying for gas because of faulty meters were leaked last month. One in six of the older meters was found to be “over-registering”, leading to an average annual overpayment of £26, making millions for the energy providers.
Unfortunately, it’s not only old gas meters that prompt inaccurate bills, electricity meters have also been shown to over or under-register.
Nick Munson, a 35-year-old teacher, had his electricity meter changed by his energy supplier, EDF Energy, a few years ago. Last year he was told the meter was faulty and that he had underpaid, which meant that he owed EDF more than £500.
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Mr Munson, of West Sussex, says: “I am unsure whether I am liable for this bill as it is merely an estimate of the electricity I may or may not have used over the past two years. The error was theirs. My previous meter worked fine. I did not request it to be changed and I was in no way aware that the refurbished meter was faulty.”
As Mr Munson pays his bills by direct debit he says it should be the responsibility of his supplier to bill him correctly. “I’m not trying to avoid a bill if it’s mine to pay. The problem I have is being told two years later and then being slapped with a huge bill.” He managed to negotiate the bill down to £300.
EDF says the fault was detected when Mr Munson provided a reading in July that showed the rate had not increased for two years. Once the meter had been replaced, the company did not recalculate the tariff until December in order to give a more accurate estimation. The resulting bill for underpayments was reduced as a “goodwill gesture”. A spokesman says: “We would like to apologise again to Mr Munson for any inconvenience caused.”
Annual energy statements Annual statements were introduced to inform customers about how much gas and electricity they used in the previous year and the total cost. They are also supposed to indicate how much energy customers are likely to use the next year and how much that will cost, along with advice on switching to a cheaper deal.
They are compulsory, but research by the price comparison website uSwitch.com showed that more than half of customers hadn’t received theirs or didn’t recognise it as an annual statement.
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Richard White, 66, of Skipton, received his annual statement but the numbers didn’t add up. He was transferred to a new tariff in 2009 by a doorstep seller from Scottish Power, based on a quote of £70 a month. When prices increased dramatically the following year the impact was deeply felt.
“I was compelled to scrap my car. A month later my fridge broke down and shortly thereafter my washing machine gave up the ghost. To keep my head above water I cancelled my dental insurance,” Mr White says.
In September last year he received his annual statement, which said he would be refunded more than £450 because he had overpaid. The statement also showed a total annual cost for gas and electricity for the next year at £765.82, with monthly direct debits of £79.33. However, this would actually add up to £951.96 over the course of the year.
“If they can’t get it right, how are we supposed to be able to understand all this?” Mr White says.
A spokesman for Scottish Power says there was an error on the statement, which will be fully investigated. “We sincerely apologise for the confusion and any distress this has caused. Mr White has since changed to our Fresh Start tariff and we will contact him again to ensure that all aspects of his account are fully up to date.”
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The handling of customers in arrears Almost five million UK households are in debt to their energy suppliers, according to uSwitch, and it can happen even if you pay by direct debit every month because millions of bills are based on estimated usage.
One reader, Anita Cassedy, of Scarborough, e-mailed us to say that her elderly in-laws had been allowed to dip into debt with their energy supplier by £300 before the bills were amended, meaning a rise in their monthly bills of £30 a month. She says: “The increase should have started when they were no more than £50 in debt.” Experts worry that energy debt could act as a barrier to switching and recommend that consumers look to save more than the sum of their arrears by changing to a more competitive deal.
Ann Robinson, the director of consumer policy at uSwitch.com, says: “Companies need to ensure that people are never in that situation and try to help customers send in meter readings to avoid estimated bills.”
Boiler maintenance plans Readers complain that boiler insurance deals are expensive and sometimes completely ineffectual.
Graham Parker, of Norwich, was happy with the maintenance deal offered by British Gas as an incentive to return as one of their customers — until his boiler developed a leak. He rang the supplier to book an engineer but was told that he didn’t have a maintenance deal.
He says: “I was told that the number I was quoting for the deal expired in 2008, but we only rejoined in 2010. I am incredulous at the way I have been treated.”
British Gas says it has apologised for failing to set up the agreement and will reimburse at least part of the cost once Mr Parker receives an invoice for the repairs he organised independently.
Energy UK, which represents the energy suppliers, says companies are working hard to improve their services.
Christine McGourty, the director of Energy UK, says: “They’re investing hundreds of millions of pounds in technology and customer services, with longer opening hours and additional online options. In the longer term, the roll-out of revolutionary new smart meters will be a radical improvement, reading the meter remotely and bringing an end to estimated bills.”
Ways to reduce your bills
• To find a cheaper energy tariff that could save you hundreds of pounds a year, use a price comparison website such as uSwitch.com (0800 0930607) or moneysupermarket.com (0844 8540139).
• Keep your energy usage as low as possible to help to save money on bills. For free energy-saving advice visit energysavingtrust.org.uk or call 0800 512012.
• Contact your supplier to ask about fitting a smart meter, which provides accurate and automatic meter readings so that bills are not based on estimated usage.
• Paying by direct debit and moving on to an online tariff can help to lower your annual energy bills. Prepayment meters are typically an expensive way to pay for your energy.
• Beware of rollover contracts that automatically move you on to another tariff and include a penalty fee for leaving the deal early.