Are you paying more but using less energy?

The energy companies currently operate a system which enables them to charge whatever they like to make sure their profit margins stay healthy. They are able to increase your DD payments willy nilly according to their own estimates or fail to pass on price reductions if you have opted for variable ‘pay what you use’. Our dependency upon them to keep warm during the winter months to survive is taken advantage of and puts you in a lose lose situation. Scottish Power owned by Spanish firm Iberdrola made a profit of nearly 1 billion euros last year, according to a report in The Guardian Money on 11th October, and no doubt my sizeable credit surplus must have contributed to that figure.

What is the point of trying to economise on our energy consumption if you are being systematically robbed by these large consortiums on any savings made. Is it not time for consumers to be given the legal right to establish their own set of terms and conditions through conciliation with Ofgem to protect us from what amounts to blatant exploitation of an essential commodity? Are smart meters with all their obstacles and concerns the only remedy to achieve a fairer way forward to counter this
abuse of consumers custom?

John Ward says:

I wonder what the increase would be if the government levies were stripped out of the figures. I am thinking here of the Renewables Obligation, the Feed In Tariff scheme, the Warm Homes Discount scheme,and the Energy Companies Obligation. I make no comment on the policy objective and effectiveness of each scheme but I fail to understand why they cannot be funded – more equitably – from general taxation [but not by increasing the 5% VAT rate for gas and electricity!].

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malcolm r says:

Policy and regulation costs typically were 8% of a bill in 2007 and are now 15%, set to become 23% in 2020, according to a breakdown I have seen.
Why tax domestic energy? It is as essential as housing and food and these are not taxed.

John Ward says:

Thanks for the figures Malcolm – that’s nearly a tripling of the percentage over a 13 year span, and it’s worse than it appears because these percentages are, of course, levied on bigger real-terms bills and compounded by the fact that less energy is actually being consumed. Perhaps the levies have now reached such a level that it would be politically impossible to transfer them to taxation, but it could produce a more equitable distribution of the burden. At the moment people on benefits are paying high energy bills including charges for somebody else’s solar panel profits; sometimes it might be circular in that they get a Warm Homes Discount paid for out of their own contributions. There are some arguments in favour of taxing energy [to curb waste and incentivise energy conservation] but that could be done through a tiered rate process. Every time we take money out of people’s pockets and wash it through a bureaucratic machine it shrinks and loses value in the process.

Beryl says:

I couldn’t agree more. I have this last week received an updated version of Scottish Powers terms and conditions, needless to say most work in their favour.

If it were legally possible to create a consumers list of terms and conditions, top of my list would be for any credit balances over £100 should be refunded within a stipulated timeframe.

More suggestions would be very welcome..

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wavechange says:

Beryl – Over the years, I had to call e.on and their predecessors about refunding credit balances and raising my direct debit when there was obviously no need. When I switched to Scottish Power, a year ago, I asked if they would do the same. The person I spoke to was quite open about the company aiming for customers to build up a credit balance over the summer to help cover winter bills. Here is what is on the SP website:

“You can always request a credit balance refund and we’re happy to arrange this. However, you can often build up a credit balance through the summer months, so we’d recommend leaving this balance on your account to pay for the extra energy you’ll use during winter.

In most circumstances you don’t need to do anything, if you have built up a credit balance we will automatically refund this to you after your annual review.”

I don’t doubt that many would prefer to have a fixed monthly payment but I would be happier to pay energy companies the amount I owe, whenever the meter is read.

John Ward says:

I agree with you and since there are already so many fancy tariff structures I don’t see why this option cannot be available for those who want it. The SP method seems to be the same as how E.on do it but it has led to a yo-yo-ing of my direct debit payments over the last eighteen months as they try to get my payments to conform to their profile by the time of the annual review without actually returning any money to me. Their efforts have not been helped by the fact that as a new property there was no historic consumption data [hence it was generously overestimated at the outset], the weather was kinder than usual and meant less gas was used for heating, we took more steps to conserve energy and adjust controls to reduce consumption, and we have been able to spend more time away from home. It’s about as scientific as Bernie the Bolt in “The Golden Shot”.

wavechange says:

Being retired, at least we have time to sort out these problems and even write about them, John. 🙂

I have never had any problem in getting e.on (and their predecessor, Powergen) to make a refund or to cancel a proposed increase in direct debit. On a couple of occasions, the person I spoke to said they could not understand why the DD had been increased in view of the credit balance and I was once invited to choose what DD to pay. On the other hand, others have had difficulties in getting refunds on credit balances of many hundreds of pounds, as has been reported on Which? Conversation and elsewhere.

This morning I found a 2009 article on the Guardian website saying that Scottish Power would pay interest on balances in excess of £100 but I’m not aware that this has happened. I believe that Ovo pays 3% on credit balances. That seems like a good investment but I imagine they are good at refunding credit balances.

Beryl says:

Wavechange. If you read the online article In The Guardian Money on 11th October re the case of Dennis Driver et al, you will see that Scottish Power have a reputation of not being very speedy at handing out refunds.

I fully understand and agree the concept of building up sufficient credit to tide you over the winter months. My particular gripe is when they over estimate your usage when your fixed rate credit balance for the duration of the previous year has remained stable and in credit over the whole year resulting in an even larger surplus, due mainly to careful usage and a milder winter as John Ward points out. It is a lose lose situation if when your credit surplus is reduced to an acceptable level your monthly online fixed instalments are increased to an unacceptable level with an ever increasing surplus at the time of year they carry out their annual assessments.

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wavechange says:

We will have to carry on working on this, Beryl. I think I’m £169 in credit to SP at present, but they actually reduced my direct debit when I moved to their latest fixed rate tariff. An email about their new T&Cs arrived a few minutes ago. 🙁

Beryl says:

Wavechange: I have just checked my SP’s online credit balance and on 2nd October, notwithstanding my usage since then which is neglible due to the current mild weather, my credit balance is £552.27 which is way up on last year at the same time.

When you find time to read SP’s T&C’s I would appreciate your comments.

John Ward says:

A disinterested observer would probably consider that I was not being fair to E.On. Overall I am quite well-satisfied with their service in terms of price [comparatively speaking], tariff, terms & conditions, annual payment review process, and customer assistance. I don’t give them as much credit as they probably deserve since they have come on a long way over the past few years and they are streets ahead of where Powergen were when we parted company. The reason I hold back is because they will not stop blowing their own trumpet in scores of e-mails and their soppy surveys. Perhaps, corporately, they feel they have to put on the hair shirt and stroke down our ruffled feathers in order to regain our loyalty and trust. As has been said elsewhere, gas and electricity are just what they are: commodities, nothing more and nothing less. The utility companies are also just that – they can’t add value to the basic product, and fundamentally – because they are in the grip of the grids – they cannot do much to improve its delivery or reliability. All they can do to make me any happier is to tweak the price in strict harmony with wholesale prices without making a song and dance about it and serve it up in a fair and comprehensible manner. In truth, E.ON are almost there, in my opinion, and I feel quite comfortable with renewing my contract and accepting without too much hesitation that their price adjustments are fair and reasonable.

John Ward says:

Dual-Fuel discounts are a significant feature of energy tariffs and are priced to be tempting because they capture additional contracts and lock customers in. Many people in rural areas and who live in flats have no gas supply so cannot benefit from the discount. Does the Regulator check that the discount is a fair and honest reflection of the commercial advantages of bundling gas and electricity contracts together and that it is not loaded as an unfair inducement for those who have a choice but conversely acts as a penalty against those who do not have the option [since all discounts come at a cost to the other consumers]. Maybe not the biggest issue in the present context but I should be interested to see what people think.

malcolm r says:

John, the costs of administering your account are included in your tariff, either in the unit cost, or more commonly in the standing charge. Adding a second fuel from the same supplier will not significantly affect the administration cost and this, presumably, is reflected in the discount. I think we would be complaining if we paid double the admin charge when it wasn’t justified!

Beryl says:

John: There is an interesting article in the online ‘The Guardian Money’ on 23rd September by Lisa Bachelor ‘titled ‘Energy Bills are Higher in Duel-Fuel Deals new research finds’ which could add to the debate.

Have just reached a deal with SP re my credit balance and been promised an acceptable refund within the next ten days. Watch this space!!!!

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malcolm r says:

Beryl, it is quite true that you will not necessarily get the cheapest deal with a dual fuel tariff. You need to check gas and electricity separately, both with different suppliers and even with the same supplier. I used two separate tariffs for gas and electricity with nPower to get the cheapest deal, and still got a dual fuel discount.

The problem with comparison websites, including Switch with Which?, is that they lead you to a single type of tariff for dual fuels. Once you realise this you need to split your search into separate tariffs. It isn’t difficult – just look at the cheapest option for gas, elec, dual separately and see which gives you the cheapest result. Ensure there are no exit penalties on fixed-term deals – with energy prices falling you may want to change before the term ends.

malcolm r says:

Sorry – for chesapest read cheapest. Any chance of editing our posts yet, Patrick?

wavechange says:

Here’s a link to the article mentioned by Beryl: http://www.theguardian.com/money/2014/sep/23/energy-bills-higher-dual-fuel-deals-new-research

A friend had read something similar, but I had forgotten to look it up.

It’s all so confusing. Please can we campaign for simple unit pricing, like we have for petrol and diesel. Get rid of standing charges, dual fuel discounts and other complications.

Beryl says:

Many thanks for the advice Malcolm. I agree it is not that difficult, the key is in the knowing and keeping up with ongoing changes in the Energy Market, the latest being irregularities involving Comparison Websites failing to pass on the cheapest tariffs to consumers. It is the only way to
introduce competition back into a very broken and uncompetitive market system.

malcolm r says:

Beryl, I have always used Switch with Which? to check tariffs in the belief it gives me all the companies. I hope I am justified in that confidence!
Once you are with a company it is worth checking their latest tariffs. If they have introduced a cheaper one you can change to it more or less instantly – it may only save a few pounds a year but take advantage of it.

Beryl says:

Malcolm: SP were offering a cheaper tariff at a saving of about £31 per month, fixed until December 2015 which I enquired about but declined when told (a) it would cancel out any refund of credit surplus and (b) my consumption was too high to be eligible. It would appear there are always strings attached to cheaper deals.

I am awaiting the promised refund within the next 10 days before deciding on the next course of action.

wavechange says:

Beryl – You asked me to have a look at SP’s terms & conditions. I did but forgot to post a reply. Sorry about that.

I did not see anything relating to refunds or direct debits that particularly concerned me. I changed to a new fixed price contract and at that time they lowered my direct debit payment and I now have a modest credit balance.

So far I have gone a whole year without having to phone SP to ask for a refund on credit or to reject an increase in direct debit, which is more than I achieved with e.on.

Beryl says:

Many thanks Wavechange. I did the sums and decided the loss of my refund worked out more expensive than opting for the fixed rate ‘cheaper’ monthly instalments tariff. My refund if and when it arrives will be worth more than the proposed saving on cheaper monthly payments.

As I am on a fixed rate contract until March 2015, I will probably hold on until then when we should have received the findings of the CMA investigation and will reassess the situation again.

wavechange says:

As a matter of interest, have you asked SP if they will make a refund of your extra credit or to decrease your direct debit payment? They will only may a single annual refund following the annual review, as was the case when I was with e.on. I’m hoping that SP will deal with the problem on request since e.on invariably did.

Beryl says: