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How can energy companies win back your trust?

An illuminated exclamation mark among question marks

Trust in energy companies has been dwindling while prices have been creeping up. Over to Tim Yeo MP, who’s giving you a chance to share your questions with your energy suppliers. Do you trust your supplier?

Public trust in energy companies is extremely low and it is not being helped by an apparent lack of transparency from firms on prices and profits. The government is planning significant changes in the UK energy system in the next few years in order to deliver secure, clean and affordable energy in future.

But, in order to deliver such changes successfully, greater public confidence and trust in the government and energy companies’ ability to deliver a fair deal to consumers and protect the most vulnerable households is needed.

We’re asking energy customers to share their questions for energy suppliers for our next committee session.

Calling for energy evidence

How can the government and companies earn the trust of the public on energy issues? It’s a tough question and there is no simple answer. That’s why the Energy and Climate Change Select Committee, which I chair, has launched an inquiry into energy prices, energy company profits and fuel poverty.

In our first evidence session, we heard from Richard Lloyd, executive director of Which?, who highlighted the complexity of energy markets and the need for greater transparency in order to strengthen consumer confidence and engagement.

Consumer Focus explained how energy company communications could be misleading to consumers, emphasising the need for clarity and simplicity in billing. The increasing burden of energy bills and the pressures placed on low-income families were outlined by Citizen’s Advice. While National Energy Action and Age UK expressed serious concerns regarding rising fuel poverty and questioned the adequacy of government programmes to address this.

The structure of energy companies, the way they trade and how they present their profits are all areas of interest to the committee, along with the impact of government policies on fuel poverty and the implications of rising energy prices for consumers.

Digging deeper into the energy market

As our inquiry progresses, we will have the opportunity to look at these issues in more depth, questioning energy company representatives, consumer and fuel poverty groups, politicians, experts and policymakers. In particular, we hope to focus on public perceptions and what energy companies and regulators can do to ensure consumer protection and fairness in the energy market.

As part of this investigation we are asking members of the public to let us know the one question they would like to see their energy provider answer. The committee will be putting some of these questions to energy company bosses on Tuesday 16 April at 10am.

We would love to hear from the Which? Conversation community, so please let us know the one question you would like put to energy firms next week. You can tweet your question using the hashtag #AskEnergyFirms by 11.59pm on Thursday 11 April.

Which? Conversation provides guest spots to external contributors. This is from Tim Yeo, chair of the Energy and Climate Change Select Committee. All opinions expressed here are Tim’s own, not necessarily those of Which?

paul stevens says:
10 April 2013

If we only have say 30 days storage of gas and oil at any one time then the prices will all ways be high but if we had say 3 months’ supply then EDF or say B/Gas could by cheaper gas and oil when the spot price drops and not be held to ransom by the major suppliers
2/ and they must drop the price when the price comes down strait a way within the storage time
And if any company brakes the rules all the profit for that year goes back to the customers finally the green tax should be put on the bills so people can see how much the government is adding to the bills
Let have a big debate on climate change as the last 16 years the planet has got colder not warmer so all the so called expert have got lied to us and the government have has well just to get more tax

Well, with complex tariffs, unfair standing charges, increasing profits for shareholders and ever increasing prices in general energy suppliers will have their work cut out regaining my trust. Not that I ever trusted them much in the first place.

If they’d prefer we all liked them a bit more, or at least hated them less how about a few simple changes in the way they operate?

One price tariffs rather than complex multi tier and price designed I’m sure to con consumers and make prices appear better.
And how is it fair when we’re all supposed to be economising on usage to reward high users with what is in effect lower overall unit costs.

Get rid of standing charges which overall penalise the poor and the low user more.
Yes I know there are fixed costs but Tesco has them too without seeing the need for a standing charge as you enter a store. Make fixed cost an element of a single unit price cover, most other businesses seem to manage..

Install some storage, I hear we only have about 30 days supply at any given time. This makes us far more vulnerable to fluctuating wholesale market prices. 3 months or even six months stored supply could enable us to buy at the best prices within a fluctuating wholesale market.

Be open and honest about profit. Surely announcing increased profit at nearly the same time as announcing a price rise is not going to make you any friends. How about foregoing some profit when wholesale prices are high in the spirit of “we’re all in it together”. Of course we all know we’re not all in it together, rather it’s a case of squeeze em till the pips squeak because suppliers really don’t care about anything other than a profit.

To be honest I really think that a fundamental part of national infrastructure should not be left to the profiteers of a privatised market. It should be re-nationalised so profits come back to the nation. Surely by now we’ve learnt enough to run a nationally owned energy supply operation at least as well as the private sector.

Chris – I agree with most of your points but I don’t believe that re-nationalisation is the answer. Our nationalised industries operated very inefficiently and energy supply had not been privatised we would probably be paying more for our fuel than at present.

I believe that the answer is to have tight regulation of energy supply companies and large fines for those that break the rules, so that we have the benefits of competition and effective controls in place to ensure that companies cannot exploit the public.

Whilst I agree in the past nationalised industries were very inefficient to the point of being a disaster that does not mean they would automatically be so today. The very tight regulation you suggest would go some way to ensure that.
I would advocate an independent body to oversee a re-nationalised energy supply operation. This watchdog would be there to ensure operational efficiency and low prices. I think it could work and I for one would prefer not to line the pockets of shareholders when it comes to a fundamental part of national infrastructure.

Remember the NHS is a nationalised body but surely we’d prefer that not to be privatised?
Not quite the same I know but the thinking need not be any different.

However I’d accept that despite my preference to re-nationalise energy the chances of it happening are slim. The country simply could not afford to buy it back. The blunder to privatise was made many years ago, back when we sold much of all the other family silver to bale us out of a previous crisis. A blunder we’ll have to live with for a very long time.

Chris – Neither of us knows whether nationalisation would work, so we will have to agree to differ. We certainly agree that it is unlikely to happen. The huge mistake, in my view, was not privatisation but allowing energy supply to fall into foreign hands.

I completely agree with you about getting rid of standard charges. Unfortunately, there are some heavy users who want to be subsidised by those who want to be more frugal or simply cannot afford to spend much on energy.

Well I think we agree on more than we disagree.
Privatisation is a bit of an academic argument because national finances are such that it’s not going to happen even if there was a consensus to go that way.
I think that’s a shame but I accept some others think differently.

Chris – One thing I forgot to mention is that I believe our energy supply and other essential services are too important to be left in the hands of whichever government is in power at the time. You mentioned involving an independent body to oversee re-nationalised energy supply. Assuming that re-nationalisation is fairly unlikely, we certainly need an independent investigation of many aspects of energy supply to determine what controls are needed on profits, continuity of supply, investment for the future, and tackling energy waste. Then the government (whichever is in power at the time) needs to implement the necessary changes and hopefully regain some public trust.

We thought we had tight regulation over the financial services but significant irregularities occured and still do.
Why do you think a regulatory body would fare better with the energy companies?
The issues are still the same while they operate as limited companies. Their priority will be to drive up the share price by sustaining an increasing profit regime.
Two questions I would like to see put the panel are
1. In order of operational priority, is customer satisfaction higher than share value?
2. What justications are there for remuneration levels of their executive officers.?

If you’re not on Twitter and you have a short and snappy question to ask your energy supplier, post it as a comment here. We’ll be able to tweet it for you via Which? Action.

Energy suppliers must refund large credit balances promptly, or pay interest.

From a former e.on customer.

Try OVO they pay 3% interest on credit balances.
For now they are one of the “better” suppliers, well better than the big 6 cartel at least.

I learned about OVO paying interest on this site. It’s more a matter of principle, and e.on did do what they were told whenever I had a polite rant at them. I am in process of switching to Scottish Power at the moment. I cannot remember if OVO features on the price comparison websites.

I believe that people should be allowed to pay for what energy they use without moving to a more expensive tariff.

Thanks anyway, Chris.

Morcia Booton says:
12 April 2013

A single price per unit its about time

I’m with EDF and I believe they generate something like 60% of their electricity via their 8 nuclear power stations, so my question is why are the costs of this generation going up year on year so much that you have to keep raising the price ?

mikeeiley says:
11 April 2013

EDF made £3.8 billion profit 2011 and is owned by the French government,our and I repeat OUR assets should never have been privatised,the right person should have been put in charge and sacked if they become useless,almost everything is now owned by other countries and our useless pathetic Directorship mad past MPs are to blame,all they saw was Directorships surely MPs are elected to attend to our wishes some hold a lot of Directorships Patricia Hewitt is an example of this,arranges contracts for companies and then collects over £150000 in directorships she has no shame whatsoever and she is not alone,in future prospective MPs should swear on a binding agreement not to accept any Directorship.snouts deep in the trough.

Clearer usage costs on bills would be good, as well as more information on which tariff would be the cheapest for you.

If the rule was just one unit price and no standing charge selecting the most cost effective supplier would be as easy as buying baked beans.
We’d have some real competition then rather than the smoke a mirrors multiple tariff sales model we have now.

Agreed Chris, but even if there is only a single tariff, there is still the possibility of price fixing by the major supply companies.

I would like the maximum price to be set independently and if the companies want to sell for less, that is fine. That is one way of achieving genuine competition.

The first thing a single unit price would do is to reduce the number of companies drastically. The choice of which company to go for would be a no brainer; those who couldn’t match the cheapest would soon fail. Unlike just about any other product you can’t have a selection of varieties that you can charge different prices for: there’ s only one sort of electricity, and one delivery point. They could only compete on more subjective criteria like customer service and loyalty programmes and rely even more than now on inertia and contractual lock-ins to prevent switching

The reason all these companies exist and make handsome profits is almost entirely because of the absurdly confusing range of tariffs meaning that most people have no real idea whether they’re getting the best deal.

Well, customer service seems to be a good thing to compete on. There seems plenty of opportunity for improvement. Different payment options would be another. I would love to use a company that just charged me on the basis of how much energy I had used during the past month or quarter. At present, this seems to be an expensive way of buying energy. Rewarding customer loyalty would be a better incentive to keep customers than fear of the complexities of switching.

I don’t disagree. I should have added that there is huge resistance from the industry to simplification of tariffs for the reasons given, and that their friends in the DECC will support them – they consider that they are there to defend the industry, not the consumer – unless there is huge political pressure for reform.

You regularly get the CEO of one company or the other on the Today programme telling barefaced lies about how transparent they are. The only thing that is transparent is the barefaced lying.

Like they don’t fix prices between themselves now?
Why do you think so many refer to the big 6 as the “big 6 cartel”.

Cartel or not thing is they all probably pay about the same wholesale price so given they all run similar operations and all want to make as much profit as market competition will allow retail prices won’t be vastly different, how can they?

How much money they make really depends on the volume of business they can secure and a major factor in that is how attractive they can make their prices appear through the consumer confusing tactic of multiple tariffs and variable standing charges.

I’d bet that over say a three or four year period of constant annual energy consumption the total price difference between the big 6 is tiny. This make switching a useful but only short term gain unless you do it very often and get the timing and choice of new supplier just right each time.

So much for the advantage of free market competition?
I’m not sure it really exists. We only have the appearance that it exists because of the smoke and mirrors sales approach they all use.

I assume that price fixing does occur and my point is that it could (still) occur with a single tariff system. The priority for stamping out price fixing must be essential services such as energy supply.

Apart from Coop Energy they are their to benefit their shareholders and screw their customers for everything they can get. There is absolutely nothing they can do to win back my trust, they never had it in the first place.

Not so sure about the co-op either! Think there could be less transparency there than we might like.

What about Ecotricity? They use 100% of profit to build new wind and sun generation and to build new green gas plants. They also have a very simple tariff structure and good customer service, based in the UK. To date they do NOT charge any extra for paying by any method other than Direct Debit.

All in all they’re pretty good and if, like me, you are interested in wind and other renewables, they do more for that than any other supplier, including the Co-Op who are lagging far behind.

D.P.Hadden says:
11 April 2013

Years ago gas comsumption was measured in THERMS. Energy companies buy gas in this unit measuer. Lets have consumers prices for gas priced in therms then there is a direct corallation to the wholesale price, further customers will be able to check their bills without the complicated formula now used and there will clarity in the market.
Regards D.P.Hadden

A them is about 30 kWh and another measure of energy. You’d still have to do a conversion between the volume recorded by the meter and the calorific value of the gas supplied to get the energy content.

We should be charged by the unit which our meters measure – for many thousands of us that is still cubic feet, for others it’s cubic metres. Whichever it is, we should be told a price per cubic unit and charged at that rate. Then everyone can see exactly what they are using and what they are paying for it.

Therms would be a better idea than the present obfuscatory system which is there purely to bamboozle customers and facilitate the massive profiteering.

Morcia Booton says:
12 April 2013

Why when they make such colossal profits do all the companies charge so much

They charge so much so that they can make colossal profits. That is what they exist to do. They charge as much as they can get.

The Energy companies would say its to fund future investment and pay shareholders a bounty to save having to raise cash on the open market which they claim will cost more.

richard says:
13 April 2013

Re- Nationalisation is the answer.

There are those who think that if re-nationalised the energy industry would be as poorly run as in the old days. Well that’s obviously possible but if a modern nationalised energy industry was overseen by an independent body who’s job it was to ensure maximum efficiency and lowest possible prices I think it could work. Couldn’t be much worse that the free for all profiteering cartel we have today.

Biggest problem is the country has been mis-managed by incompetent governments for so long our finances are such we couldn’t afford to buy it back if we wanted to.

All we can do is tinker around the edges arguing about complex tariffs and generally complaining about the ever increasing prices. We’ll really do little to solve the big problem within those limitations and perhaps we should accept we were condemned to very expensive energy a long time ago.
You know, “stuffed”.

Chris – You have already said that we cannot afford to re-nationalise energy.

Maybe instead of fining companies such very low sums when they’re found to deceive/lie/cheat their customers. Maybe the fine should be a 20% stack in the company. I can’t imagine any snout in the trough CEO wanting to explain to his/her shareholders why their stake had been diluted and it may even force companies to tidy up their acts, or if not, we’ll re-nationalise your company from under you. Just a thought.

Chris – Having thought more about this, perhaps we could try letting the government have a go at competing in the energy market by buying one of the existing companies. I am fairly confident that this would be doomed to fail but would love to be proved wrong.

I agree with William that there should be large fines for unacceptable behaviour by energy companies. If fines are small, they are little more than an operating expense.