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What would make you trust energy companies?

High price for energy and gasoline in a news article headline

We’ve seen price rise announcements from four of the Big Six energy suppliers – unsurprisingly the reaction has been resoundingly negative. In fact, our research shows trust in energy suppliers has hit rock bottom.

Consumer trust in the energy industry has plummeted to a new low.

Just one in seven people say they trust energy companies to act in their best interest – the lowest since our Consumer Insight Tracker launched in July 2012. This compares to one in four before the price rises were announced.

Low trust in the energy industry

In fact, energy is now the most distrusted of all consumer industry sectors (59%), lower than banking (33%), car salesmen (55%) and train companies (27%).

Which? Convo commenter Charlie isn’t surprised, telling us:

‘I don’t trust energy companies to act in my best interest. But then they are private companies and are interested, primarily, in generating profit. Can we expect them to put the customer first without a strong regulatory body to ensure they do?’

Chris had harsh words for the energy companies and the government too:

‘The whole stinking corrupt setup is a national disgrace which will kill people and our Government just sits there playing with itself and only offering “helpful” advice like put on another jumper or switch to an equally expensive alternative supplier. Rubbish.’

Take action on energy bills

We’ve also found that the number of people worrying about energy prices has rocketed. Energy is now top of the list of consumer worries – eight in ten people are worried about energy prices, the highest this has been since October last year.

What we’ve heard from the Government so far is too little, too late – we need to see radical changes now. This is why we’re calling on the Chancellor to stand up for consumers when he delivers his Autumn Statement on 4 December.

George Osborne should cut the Big Six down to size to get competition into the market, and the cost of government energy policies should be cut back too. You can help by signing our petition, like Beryl has:

‘Time for action NOW. The debate has gone on long enough. It’s now up to George O to break the deadlock before the winter sets in so keep the campaign going Which?’

Do you trust energy companies to work in your best interest? Do you think we need to see radical action to fix the energy market?

Do you trust energy companies to act in your best interest?

No (97%, 2,139 Votes)

Don't know (2%, 45 Votes)

Yes (1%, 30 Votes)

Total Voters: 2,214

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Comments
Profile photo of wavechange
Member

My top priority is to have simple unit prices for both gas and electricity, so that the prices offered by different companies can be compared at a glance. We can easily compare the cost of petrol and diesel, so why not gas and electricity?

Profile photo of malcolm r
Member

wavechange, a recurring plea that is not black and white. If you want a choice between say variable price, one or more fixed tariffs, economy 7 (and more complex time-based pricing with smart meters) it will never be a simple choice. As for no standing charge, some companies do offer this option for low users, so you can compare “simple” unit prices. Some of the components of the current standing charge can be argued as independent of usage – perhaps these should be moved to general taxation. Others – your suppliers administration costs, meter reading, maintaining the equipment that connects you to the grid, could be argued as costs we should all pay. A minimum standing charge of some sort could be then seen as fair. But it is far from clearcut how it should be set. At present we all have choices – I am in favour of maintaining choice so we can get the best overall deal.
Petrol and diesel prices may seem easier to compare – but how similar are they to each other in your area? In mine there is not much difference – is there real competition here? And remember, these fuels do not come delivered to your door – you have to drive to get them, and your best price might not be your nearest. Do you work out the cost of driving to and from the fuel station and factoring into the litre price to see if you get the best deal? The real cost is not so obvious.

Profile photo of wavechange
Member

Malcolm

What you are wanting is for low users to subsidise those who use more gas and electricity. Please give some thought to those who are struggling to pay their fuel bills. Energy costs are a major concern to many in the UK.

Perhaps there is a case for moving standing charges to be moved to general taxation, but that is a challenge for the future. Please, please don’t expect low users to subsidise those who use more energy.

The elderly, infirm and disadvantaged people are not necessarily capable of finding the best energy deal.

Profile photo of malcolm r
Member

wavechange – no, that is not what I want to see as you know from previous conversations. Low user does not equate to poor – there are plenty of low users such as holiday home and second home owners, people with small and very well insulated properties, those with heat pumps and solar panels, who may use relatively little energy. Equally there are bigger families in larger houses, old properties that are poorly insulated, those only on electricity, who are poor – many examples have been given in previous conversations. So please let us not assume that low user means poor and higher user means wealthy in all cases – it doesn’t.
There are suppliers who charge only for units used without a standing charge – I have given some of these on another conversation. So for a small user these may well offer the best option and cheapest bill. Remember the unit charge then carries a contribution towards fixed costs. For higher users a standing charge may give them the better solution.
I could argue that the small user – rich or poor – pays very little towards the fixed costs involved, and therefore is subsidised by the higher user – but I won’t, because the arguments are simply not that simple.
We should have a choice – that is what other “stakeholders” (I wish we could abolish that word), consumer groups and others that were consulted have decided, and what Ofgem proposes. I like choice. It is not a simple world in all sorts of matters, and trying to make it so by artificially distorting markets is not the way to tackle it.

Profile photo of wavechange
Member

You are not going to convince me, Malcolm. I am not the only one who would like standing charges abolished and energy prices simplified, so that it is very easy to compare prices.

No-one should have to resort to websites, phone calls or calculations just to decide which company to buy energy from, and expecting low users to subsidise high users as a result of standing charges is unacceptable.

Member
pouchla says:
4 November 2013

I agree

Profile photo of ChrisGloucester
Member

Wavechange,
Rest assured you are not the only person who would like standing charges abolished.
They are the biggest con going, pay before you actually consume anything how is that fair?
All companies have fixed costs but they don’t all resort to this con trick.

And yes do away with standing charges and multiple-tier tariffs and choosing the best value supplier becomes very easy. No more working through endless options to establish the most competitive. If I want to do puzzles I’d prefer to do puzzles that don’t end up costing me money should I not get them right.

Profile photo of wavechange
Member

Thanks Chris. We can both remember previous Conversations where there was plenty of support for simple pricing, and I doubt that this has changed. Of course, the companies and shareholders probably don’t want customers to be able to make simple price comparisons, in the same way that supermarkets often fail to give unit pricing for multi-buy offers. I have little faith in Ofcom or governments – present and past.

I heard in the news that the CEO of Centrica, which owns British Gas, has decided not to take his bonus this year because of public concern about rising prices. I am not sure of the figure because different reports quote different amounts. I accept that companies have to make a profit but I suspect that the staff and shareholders are being considered more than customers – and that has to change.

Member
terryindorset says:
8 November 2013

I agree with you wavechange. We should all pay the same for whatever amount we use. The problem is our government(s) is/are run by corrupt people who collude with their corrupt chums in the energy companies (& the banks) who don’t give the consumer/taxpayer a second’s thought.
I suspect pro-company comments here & assume they’re company spokes-people making them.

To those who want real info, watch & listen to Max Keiser for the very best incisive insights into all the nasty things going on in this country.

Profile photo of wavechange
Member

I’m not going to point fingers, but the fact that many customers are paying more than they need to because they cannot make simple price comparisons does suggest a deliberate attempt to maximise profits.

Member

You can require a breakdown of all of the costs to a typical utility bill, but the most “opaque” will be the True Prices that these Retailers pay for the gas and electricity they buy and sell on to us. Where they are contracted to purchase from an Affiliate Generating company owned by a Company owning the Generator/Gas Producing Company and also the Retailer, it is unlikely the typically timid UK Regulators will ever establish what the true Transfer Prices are.

Real Transfer Price information will always be witheld as “commercially sensitive” or some meaningless indicative prices will be suggested without disclosing the hidden discounts or rebates. Establishing true Transfer Prices is very difficult and has been with us for a long time and similar “opaque” dealings have been used by Other International Companies to muddy the waters over many years.pu

It probably also is another Tax Avoidance technique that is being used and any Inquiry into Utility Companies should involve an aggressive review involving HMRC, but are they and their Political “Masters” really up to it?

Profile photo of malcolm r
Member

What I want to see are all the costs in our energy billsmade made visible to us . Wholesale fuel prices, transmission cost, green levies, social charges, etc. so that can judge whether we are being ripped off or not. The importance of energy means the government should set about this urgently and with knowledgable people – not a useless select committee and a meek Ofgem. It should not be complicated!
Energy bills are centre stage, but there seems to be less focus on other spends that are crucial to our budgets – food prices, petrol and diesel, public transport, housing costs.These are all probably bigger parts of many budgets than energy. Do we in future have to have continual scrutiny of all these?
It is facts that we need to avoid the emotive responses that really do not move us forward.

Profile photo of willowe
Member

I would want a company to say what unit costs it paid for it’s gas and electricity supplies and show that those costs were reasonable given world energy prices (not just the prices offered by the Big Six generators in the UK for example).
Then I would want the company to show what it added to those unit costs for the cost of distribution, administration, green taxes, etc.. and to justify these added costs, for example by showing that the companies costs were similar to or lower than comparable companies.
I would like the company to have one tariff for gas and one for electricity, so that the total unit costs above could be directly compared with the unit charge to the consumer, to make the profit element clear.
I can see the chances of this happening are extremely slim !

Profile photo of banjo
Member

Bring back the Gas Board.

Profile photo of snowball
Member

In our small apartment in France I am supplied by EDF (over 80% owned by the French government). I have a choice of 2 tariffs, one with a standing charge and one without. End of story. Prices went up 5% this year and are set to rise 5% again this year, as decreed by the government. My standing charge is almost exactly the same as what currently I pay at home in the UK but my price per unit in France is about 2/3 of my UK rate.
Perhaps allowing “competition” in the UK was a bad idea?

Profile photo of malcolm r
Member

snowball, EU average unit prices for May 2013 indicate for:
Electricity – France was 15% cheaper than UK (France was 8th cheapest in the EU, UK 14th ).
Gas – France was 28% more expensive than UK (France 11th and UK 4th cheapest out of the 28 EU countries.
You say you had two price rises this year totalling 10% – is that right? Was any explanation given?

Profile photo of snowball
Member

I am not aware of any explanation except that I did pick up that the government was involved in fixing the increases. No doubt farmers will tip turnips on a few motorways and drive a few flocks of sheep through big cities because they will not realise how well they are doing at only 5% p.a.

Member
terryindorset says:
8 November 2013

What competition had you in mind?

Profile photo of wavechange
Member

I might trust energy companies if they were more honest. Take the case of smart meters.

Scottish Power, my current supplier, has this information on its website:
“Do I have to pay for my smart meter?
You will not be asked to pay upfront for the installation of a smart meter as over time your energy bills will include any associated costs.” That is not dishonest but perhaps a bit misleading because it gives no indication of the considerable cost of providing smart meters, which we will share even if we refuse to have one.

e.on makes a very misleading statement on their website:
“And the best bit…
Smart meters are FREE”

My view is that anyone who wants a smart meter should be expected to pay for it because of the significant costs involved.

Profile photo of banjo
Member

“My view is that anyone who wants a smart meter should be expected to pay for it because of the significant costs involved. ”

But no one in their right mind would want a smart meter. They are going to be hackable (isn’t everything?) and expensive. Who would want one?

Profile photo of wavechange
Member

Some will argue about the security issue but no-one can deny the cost. In my view, the best arguments are simple ones that everyone can understand and relate to.

The biggest problem is that a fair number of smart meters have already been installed, making it more difficult to persuade the government that the roll out is not good use of money, particularly at a time when so many people are struggling to pay their energy bills.

Profile photo of ChrisGloucester
Member

You are quite right of course smart meters will be of no benefit at all to the consumer, after the initial novelty has worn off.
As regards who pays for them, well we all will, not just those who want one, and I completely agree who would really want one and why?

Perhaps that would be something to help energy suppliers regain our trust?
Only install smart meters if the customer really wants one and only charge those who want one rather than all of us.
See how many get installed then?
Course no chance of it going this way, although I’d be very happy to be proven wrong.

Profile photo of ChrisGloucester
Member

“What would make you trust energy companies?”
Bit of an academic question because we all know they are very unlikely to change anything because they don’t think anything is wrong.

High prices are to them the fault of wholesalers and Government taxes and any poor service is because they have cut their operating costs to the absolute minimum. So they must be trying their best????

Reality is because they’re private enterprise operations, operating in an open and “competitive” (yeah right) market place, their only objective is to make as much profit as possible. Their success or failure is measured only by the amount of profit they make. Any social responsibility, and lets face it the little they have has been forced upon them, comes as a very secondary consideration.

You can’t really blame them it’s in their DNA.

But you can blame successive Government for creating the market place in which they operate, and really only Government can correct what has become in my opinion this very dysfunctional market place.

Profile photo of John Ward
Member

Thankfully none of the big energy companies, apart from British Gas, are making preposterous claims about their value to society. On every vehicle, bill, and advert this particular corporation, however, informs us that it “looking after your world”. If only . . .

Profile photo of malcolm r
Member

Finding a wholesale price for gas on the net does not seem to be difficult – but is it representative of what our energy suppliers pay? Why cannot someone tell us?
If you look on infomine.com you can find a price history. Converting this into UK figures gives the following average costs in pence per kiloWatt hour (1 kWh = 1 unit).
2009 – 2010 – 1.4p
2010 – 2011 – 0.86p
2011- 2012 – 0.7p
2013 – – 0.78p
The gas cost forms only part of an average bill – 67%, but this also includes the suppliers costs (admin etc) and profit. We don’t know what the “suppliers costs” are. Profit is said to be 3-4%.
Other costs are
18% to maintain and develop the distribution network
6% – environmental costs (subsidising feed in tariffs, warm homes schemes, carbon reduction etc
5% vat
4% other costs – gas storage, meters etc.
Now:
A typical gas price to us is 4p / kWh.
33% is made up of these other costs = 1.3p
According to OVO, gas costs around 70p/therm = 2.4p per kWh
Total cost / unit 3.7p.
So does this leave 0.3p (8%) to cover both admin costs + profit?
But how does OVO’s figure of 2.4p per kWh tally with the wholesale gas cost of around 1p per kWh from the infomine.com site?
And the wholesale gas price reduced from 2008 to 2012 by 50%, and went up 10% only this year. Does this reflect in our bills?
I am not pretending this analysis is correct, but there are surely people with access to data that can explain it properly. Why do we not ask for this Which?, then we will have facts to get our teeth into.

Profile photo of John Ward
Member

Well done Malcolm. I suppose that in some cobwebbed crevice of Ofgem, by the light of a guttering candle, these [and other] numbers are being crunched, granulated and spun into an illusion of a competitive market for the annoyance of the consumers’ tribunes and the confounding of our politicians. They seem to have realised at last that Something Has to be Done. I wish they would get on and do it, but as you say we must have some reliable data to start with.

Profile photo of Beryl
Member

To gain my trust in the Energy Co’s I would like to see :
(a) More transparency, to include a comprehensive and unabridged breakdown of all wholesale prices, profit between generation and supply, taxes, green levies, shareholder dividends, hedging practices etc. (b) Investigation into the questionable and unethical oligopolistic practices and tacit collusion between all of these large Economies of Scale and Govt. intervention to counter this in order to reintroduce more competition into the market. (c) Introduce a way to prevent subsidies being swallowed up by huge price hikes and the Govt. effectively reclaiming them back through taxation. (d) More input from OfGem and last but not least (e) Bring price increases down so that they are more in line with inflation.

Profile photo of snowball
Member

I just came across this at the bottom of my last bill from EDF:

“Profit and loss: Like most companies, we aim to make a profit. In 2012, EDF Energy made a profit (EBITDA) of £1,667m. Our residential business – supplying energy to customers’ homes – made a loss of £62m.”

How easy it must be for the supply company to show a loss when the generation division can raise internal charges at any price it chooses for the wholesale cost of power to the supply company!

Member

Snowball,

I totally agree, one of the real and major difficulties in any review of “Competition” in utility bills will be to establish true Wholesale Prices and establishing real Transfer Prices between Generators and Suppliers where these Affiliates are owned by a Company that is probably based Offshore.

I don’t hold much hope of present Regulators getting to the bottom of this. Will probably be rather like their conclusion earlier this year that retail prices in UK filling stations were competitive.

Profile photo of malcolm r
Member

I’ve just transferred to EDF for gas and electricity. There letter says “If anyone launches a new tariff that can save you more than…..£52 per year at typical consumption we’ll let you know”. On the face of it this is step in the right direction – interesting to see how well it works.

Profile photo of wavechange
Member

If companies decide to compete on being fair to customers, I’m all for it.

I know you keep an eye on prices, Malcolm, so keep the letter to send to the Advertising Standards Authority if EDF lets you down.

Member
billcormack says:
8 November 2013

If the goverment really want consumers to have a fair deal then make the energy companies show the price PER UNIT.How many of us can’t tell where the cheapest petrol is,it is priced per unit eg litre.

Member
Dirk Tinbergen says:
9 November 2013

What would help in comparing prices is if companies could only by law change their prices once a year and then all on the same day. The day after that one could make valid comparison for the next 12 months and take appropriate action.

Profile photo of Beryl
Member

Unless the ‘Big Six’ are divided up into separate smaller companies they have the power to manipulate the market. Because of their size they are large enough (and rich enough) to be able to temporarily reduce their prices and undercut any smaller competition entering It. This may initially be welcomed by consumers until they realise the smaller companies have once again been priced out of the market and we are once again returned to huge price hikes and a polarized uncompetitive market situation which begs the question – is there an alternative solution other than nationalisation? Ofgem have found no evidence of market rigging so why are we still in an uncompetitive market where switching supply is not working? Ofwat have recently refused Thames Water an increase in their prices. Could this have any bearing on the fact that domestic water supply is zero rated for tax?

Profile photo of malcolm r
Member

Beryl, I count 17 other energy suppliers in addition to the big 6. We need large companies at the supply end – generating electricity and producing / storing gas – because of the capital investment required. What is then needed is an open and visible wholesale market that all the energy distributors can access to buy energy and sell it on to consumers. Inevitably there will be different business plans here – including forward buying, purchasing volumes, maybe timing if smart meters are used.
We could use similar visibilty in the costs of petrol and diesel – many probably spend as much or more on these fuels than gas and electricity in a market dominated by not many providers.

Profile photo of Beryl
Member

Malcolm: Yes I am in full agreement of the need for openness and transparency, it’s the only way to clarify what is going on in a seemingly very dysfunctional energy market, but unless the Big Six are cut down to size I can’t envisage a return to genuine and fair market competition. A large proportion of investment however already comes from foreign companies, some of which are State or partly State owned. I just hope that George Osbourne when he makes his speech on the 4th December keeps politics out of his proposals and refrains from deferring amendments (if any) until just before the next election. We need action now before winter sets in.
I used Which? Switch to change my provider and as you are aware there are a number of choices to be made including both large and small companies. I eventually chose Scottish Power Online Energy Saver 16 which was the best deal for me at the time and I have just switched again to their Online Fixed until February 2015 in lieu of their forthcoming price increases. I note in your previous comment that you opted for an EDF deal, also one of the monopolistic Big Six, which makes complete sense if it was the best deal to suit you, given the huge market price increases.
In the final analysis however, private investors want their remuneration but consumers also expect fair and realistic price increases.

Member
Paul Hunt says:
18 November 2013

“Do you trust energy companies to act in your best interest?”

What a stupid question. Every large company dealing directly with the public – and this is not just energy companies – is a conspiracy against the public. Four of the UK’s Big 6 are subsidiaries of 4 of the EU’s Big 7 – all of which are struggling financially as a result of a combination of their greed and stupidity, lack of strategic foresight and imbecilic EU and national policies. These four are milking British energy consumers to shore up their parents’ balance sheets. This provides cover for Centrica and SSE to do their own milking. The CEOs of 10 of the EU’s energy behemoths (GdF/Suez, RWE, Eon, Eni, ENEL, Vattenfall, CEZ, Gas Terra, Iberdrola and Gas Natural) have formed a group lobbying the EU and national governments that they’re TBTF.

DG COMP of the EU Commission has the power to investigate the self-serving antics of these behemoths and to impose the structural remedies required – ideally breaking them up in to wholesale and retail businesses. The European Council, Commission and Parliament need to devise repairs to the EU ETS and to rein in excessive national subsidisation of renewables. The stupid, British-originated system of energy regulation needs reform – as does the equally stupid, again British-originated Entry-Exit pricing of gas transmission capacity. And there must be effective statutory representation of the collective interests of final consumers in regulatory and competition authority proceedings.

There is very little the UK Government (or its agencies) can do unilaterally – except makes things worse. This needs the Government to engage effectively with its EU partners. Not much chance of that happening. Increasing numbers of British energy consumers better get used to freezing in the dark.

Profile photo of malcolm r
Member

If anyone thinks governments – UK or EU – understand business then dream on. They – politicians and civil servants – generally do not have the background or expertise to deal effectively with commercial organisations. Seems a bit bleak? A pity we do not have better-funded consumer organisations to work more effectively on our behalf. It seems that to lobby for change requires money, or the attraction of nice jobs for soon-to-become-ex politicians and beaurocrats. When it seems those “independently” reporting on the case for HS2 also have a financial interest in it going ahead; when parliamentary Committees involve the industries they report on as advisers; when you look at the way they deal incompetently with purchasing; when you look at the dodgy businessmen appointed to sit on Governments boards……..I must be feeling very cynical this morning.

Profile photo of Beryl
Member

Paul: I think the question was originally intended to instigate a debate.
Judging by your last comments it would appear (and to coin a phrase) “The devil is very much in the detail”. Time to invest in a wood burning stove, and a cache of candles I think!
We definitely need a Plan B if George Osborne fails to come up with a solution on the 5th December. Any suggestions? In any event, I hope Which? and other consumer groups keep the campaign ongoing until he does.

Profile photo of malcolm r
Member

To have any trust in the energy companies I believe requires trust in independent analysis of their performance. That means trusting the competence and intentions of the regulator – Ofgem. They issue regular information – the last of importance to domestic consumers being the Retail Market Review, setting out particularly its recommendations on charging models for energy.

Today, they have issued the following documens, essentially attempting to explain the financial affairs of the Big 6 energy suppliers in both energy supply and generation.

I would not pretend to be able to assess whether these documents really deal with the issues satisfactorily, but Which? could. I hope they will do so in an impartial way – forgetting their own preconceptions about this market – and present us with an unbiassed analysis as to whether profits are fair or not, assuming the relevant information is contained within these documents.

Incidentally, since the smaller energy suppliers do not seem to offer generally cheaper deals than the Big 6, would it not be interesting to examine their profits also?

Sorry the links are so lengthy! If you want to examine them just copy and paste into your browser. The documents are:

Revenue, costs and profits:
https://www.ofgem.gov.uk/publications-and-updates/revenues-costs-and-profits-large-energy-companies-2012?utm_source=Ofgem+Website+Mailing+List&utm_campaign=c9b8b695f2-Ofgem_Email_Alert11_25_2013&utm_medium=email&utm_term=0_a9e586c268-c9b8b695f2-395487641

Understand their profits:
https://www.ofgem.gov.uk/electricity/retail-market/monitoring-data-and-statistics/understanding-profits-big-energy-suppliers?utm_source=Ofgem+Website+Mailing+List&utm_campaign=c9b8b695f2-Ofgem_Email_Alert11_25_2013&utm_medium=email&utm_term=0_a9e586c268-c9b8b695f2-395487641

Letter about monitoring energy companies:
https://www.ofgem.gov.uk/publications-and-updates/letter-ofgem-oft-and-cma-secretary-state-competition-energy-markets?utm_source=Ofgem+Website+Mailing+List&utm_campaign=c9b8b695f2-Ofgem_Email_Alert11_25_2013&utm_medium=email&utm_term=0_a9e586c268-c9b8b695f2-395487641

Profile photo of Beryl
Member

Having read through the reports submitted by Malcolm R (which I found very informative but somewhat inconclusive) leads me to believe Ofgem are at last showing signs of bowing down to public pressure but we have to wait until March 2014 for the results of a full and comprehensive assessment! At a Selective Committee meeting held this week Ofgem Interim CEO asserted rather ambiguously “There was no evidence of anything untoward but we can’t rule it out .” There was no evidence of limiting profits in order to prevent the possibility of a Windfall Tax and Co’s were not obligated to disclose their international trading profits. It would appear there is still much work yet to be done!
I agree Ofgem should wholly investigate the energy market including the smaller Co’s if competition is to be restored.