The CMA, energy bills and how the Big Six got off scot-free

We read the Competition and Markets Authority (CMA) investigation into Energy Markets report – with keen interest. We were anticipating something which would highlight the impacts of energy company monopolies, address unfairness for standard variable and pre-payment customers and suggest some useful remedies. What we got was this…

The CMA report effectively blames the 70% of energy customers sitting on expensive standard variable tariffs for being overcharged – because they have failed to switch. They think, despite all the national switching campaigns that have gone before, that more marketing and advertising should be the solution to a problem caused by up to 20% price differentiation between effectively identical products.

We don’t dispute that switching is an approach that works for individuals in the short term – you can find one-year fixed deals which are a lot cheaper than standard tariffs (and we can help you do this). But is it really the best the CMA can do to propose relying on customers (70% of customers!) to sort out the problem?

The CMA report fails to explore any robust approaches to making standard variable tariffs fairer, more competitive, ‘standard’ or indeed ‘variable’. As Dieter Helm points out;
In a well functioning competitive market, suppliers would compete to offer Standard Variable Tariffs. They would be “standard” because the product is homogenous. They would be variable (with lags of course) because costs vary. The CMA identifies the ‘striking’ difference between the prices that different customers pay for an almost entirely homogenous product – over 20% – but instead of framing this as market or regulatory failure – it proposes that customers should be further encouraged to fix this by switching. They note that firms are earning an average 11% more revenue from standard variable customers than from those on other tariffs – but (inexplicably) think that individuals ought to sort this out for themselves.

The CMA’s finding and recommendations become even more perplexing when they correctly identify that those on low incomes, with low qualifications, living in rented accommodation or who are above 65 are typically paying more for energy due to being more likely to be on standard variable tariffs. The CMA quickly start referring to these customer groups as ‘disengaged’ and thus are able to set out their proposal for solving the problem through a programme of ‘engagement’…

So what do they propose? Wait for it… The CMA intend to circulate the personal details of everyone on a standard variable tariff to other energy companies, so that they can be sent direct marketing with details of cheaper offers. That’s it.

There are many reasons why this response is lacking. We summarise a few here (thanks to Dieter Helm’s analysis

1. Wholesale market prices have fallen 30% over the last 3 years and standard variable tariffs barely reflect this. How will more marketing effectively address this disparity?

2. Energy wholesale prices are becoming increasing fixed as more and more generation is contracted (FiTs and capacity contracts) at a set price per unit by government. This means there will be increasingly less difference between the cost of wholesale energy and thus less reason for difference in consumer pricing.

3. How many people read unsolicited mail from companies trying to sell them products? Aren’t we already bombarded with marketing – why will this be any different?

4. This proposal identifies that low income and vulnerable households pay more, but fails to come up with a proposal which will really respond to this aspect of the problem.

On a different, but related matter, if you think that Ofgem should use their powers to stop the unfair treatment of vulnerable energy customers by suppliers – so do we, and we’ve started a petition about it:

British Gas does something great…

Yes, you did read the title correctly… and no I haven’t lost my mind. I’m about to congratulate an energy company for seeing the future and attempting to deliver it.

‘Free Energy at the Weekend’ reads the headline, ‘Gotta be a catch’ comes the reply. Well yes, and no is my observation. You may have seen that British Gas are now offering a tariff to households with smart meters which will give them ‘free’ daytime electricity on a Saturday or Sunday.

There is a huge degree of cynicism regarding energy companies, much of it justified. However, this time I think British Gas deserve some credit for taking a punt on what many perceive as the future of domestic energy – so what’s the deal?

Time of use tariffs are nothing new, as anyone who lives with storage heaters will tell you. Economy 7 tariffs, designed as a way of using the surplus energy that non-responsive power stations supply, have been in existence for years. Offering  cheap electricity during the night, and slightly more expensive electricity during the day, they have provided a make-do solution for the imbalance of electricity on the grid. Smart grids are destined to change that – with smart meters being the domestic device that allows this to happen.

The new tariff from British Gas aims to capitalise on the 2.89 million smart meters that have already been installed in homes across the country ( although you can’t yet switch supplier to BG if your smart meters were installed by another energy supplier).    The new tariff does not charge customers for any electricity used between 9 – 5 on either a Saturday or a Sunday (customers choice). Neither does it charge any extra for electricity at other times ( over and above other British Gas tariffs )

Can it save you money?

This is the key question, and it depends how much you can change your behaviour and your starting point. If I punch in my details to a comparison site, the BG tariff is 19% more than the current cheapest deal – the question I then need to ask is can I switch 19% ( or more ) of my electricity use to a Saturday between 9 and 5? The answer, for me, is quite simple – not a chance.

Different households will generate different numbers using the above approach, and for some this might prove financially worthwhile. British Gas conducted it’s own trials and found that the average customer saving was £60 – based on it’s own standard tariff. And that’s the rub of this, it is not the cheapest way to buy your energy.

So why the congratulations?

BG deserve recognition for introducing a tariff that actually has the legs to deliver behaviour change among UK households. Energy monitoring devices have been around for ages and whilst there are some ardent energy monitoring stalwarts (me included) the impact of these devices is rarely sustained after the novelty has worn thin. Improving on this by offering a ‘free’ period gives real control back to households. The joy you can feel by completing your 17th load of washing, safe in the knowledge that all you’ve paid is the 26p standing charge, is not to be sniffed at.

I hope the take up of this tariff proves a success for 2 reasons:

  1. It’s one of the first demonstrable and practicable uses for smart meters  -as such it has the ability to be used as an engagement tool on the smart meter shy.
  2. It has the potential to make households consider their energy usage as part of their normal routine.

What ever your thoughts on smart meters, or British Gas, this really could be the start of something big…..

Contentment before Capacity

I have a new life mantra –  I found it, as I expect a lot of people do, in a pub. Though perhaps unusually it did not take several trips to the bar to discover, nor was it necessary to spend any cash to unlock the inner recesses of my mind. Rather disappointingly I saw it on a sign as I walked past, it simply read,

‘We welcome drinkers who reach contentment before capacity’

Clearly this is a sensible path to follow for anyone entering a pub – but what if we apply the ‘contentment before capacity’ principal to things that don’t contain alcohol?  Things like:

food ( don’t think anyone would argue with that )

work  (again, we’re onto a winner here)

technology ( do we need more tech in our lives?)

overdrafts ( who wants to reach the capacity of these?)

energy mix of national grid ( what…? )

reducing fuel costs by true community engagement ( I can see I’ve lost you now )

The last 2 points may not exactly follow suit but this is an energy blog after all, so what do I mean?

This is about a balance. It’s having realistic, but still ambitious, expectations of what can be achieved whilst accepting what can’t.  Let’s think about how this plays out….

Consider the energy mix of the UK. Who wouldn’t want it to be from 100% renewable sources, but how realistic is that? Is it an achievable aim? Can we only reach contentment if we have 100% renewable capacity? I suggest the answer should be no, we can’t, and with current technologies we never will. I’m not suggesting we should be complacent, or for a minute we accept that this is the ‘greenest’ government ever but spending resources focussing on unachievable goals simply reduces the amount of resource available to actually solve issues.

Fuel poverty is a key social issue for the UK. Can we only be content when no household is suffering from fuel poverty in the country? Of course we should always be championing the cause, highlighting the social injustice which has led to 15,000 of Plymouth’s households having to choose between heating and eating.  But ask yourself the question, can you honestly for-see a time when no household in Plymouth suffers from fuel poverty?

I think DECC asked itself this question when publishing the latest fuel poverty strategy. This sensibly puts efficiency improvements to the home at the heart of the issue. I don’t accept that it goes far enough quick enough – but I am content that it’s a realistic approach.

The bottom line, as far as I’m concerned, is that we need to be careful of the battles we choose. I have absolute admiration for anyone who can keep believing in a cause no matter how unlikely the desired outcome, and clearly some causes are so emotive, and so fundamental that to give up hope would be to destroy it’s reason for being.

I hope you don’t think I’m on an apathetic come down, there are a wealth of issues within PEC’s remit that demand the passion and attention they are given by PEC’s many contributors. My point is that by focussing on the ambitiously realistic we are far more likely to succeed in our aims and reach contentment before capacity. I’ll raise a glass to that – just the one…

Banners at event a

Stay warm and well – learn from a pelican

Plymouth residents have some very tricky houses to keep warm. Houses that are older and without a handy cavity to pop insulation into. There are underperforming heating systems, and sometimes, no systems at all. We have the weather to contend with too and wind that can drive rain right through gaps and cracks. Or else damp laidened air to settle on cold walls and grow black mould. Perhaps you’re living with an illness or long-term condition and worry whenever the fuel bill comes in. You’re not alone, almost half of the city worries with you.

A few months ago, when standing at a pelican crossing a friend nodded at the yellow control box and said “Do you know what’s under there?”
“Chewing gum?” I replied.
“Apart from that!”.
Well no, it turns out that I didn’t know. There is a small metal cone with grooves waiting to rotate and tell you it’s safe to cross. I was utterly amazed! I had no idea help like that was available.

And here’s the thing, there is help available…

I often meet residents who say they are astounded that PEC can help. They don’t know there is a fund to help clear energy arrears. That if eligible you can get £140 towards your electricity bill each year. That we can visit your home or talk to surly suppliers for you. That we will help you switch and knock an average of £185 from an annual bill. That suppliers can be made to take note and offer extra assistance if you have an illness or vulnerability. That grants for insulation and boilers can be found. That we can help apply for welfare benefits to maximise income and minimise worry. But we can, you know.

So today, see this blog as a friend pointing at the pelican crossing and saying “Guess what’s there”. You never know, it might just be the help you’re looking for.

The Black Hole of UK Energy Policy


One thing you don’t hear Amber Rudd or the big DC broadcasting is their incredible knowledge and ability in the field of Physics. It’s a little known fact but the whole Conservative team who concern themselves with UK energy policy are in fact expert physicists. “Nonsense!” I hear you cry .

Not so. How else could our current government have created an energy policy black hole in a mere 6 months of being office? Just so you’re clear, and thank you to Wikipedia,

‘A black hole is a geometrically defined region of spacetime exhibiting such strong gravitational effects that nothing can escape from inside it.’

The energy policy black hole created by the conservatives clearly has an insatiable appetite, consuming all manner of energy related policies – FiTS, Green Deal, Roc’s, Zero Carbon homes, chunks of ECO (the remainder of which is perilously close to the edge). The key thing about a black hole is that nothing gets out – all of these policies have gone for good.

“Not True” I can hear ardent Tory supporters shout, “FiTs are still here!”. In spirit perhaps, though you show me a solar scheme that’s viable based on FiTs and I’ll show you the greenest government ever……

I’m a firm believer in changing things that don’t work, but you can’t just stop something as critical as reducing CO2 emissions, or insulating homes occupied by the fuel poor, without replacing it with something better. We’ve had nothing other than a verbal rhetoric from our most esteemed physicists – a rhetoric that suggests ‘the Energy Company Obligation is concentrated on those in greatest need’.

Need in Amber Rudd’s eyes is defined as ‘the ones who live in damp and draughty homes’ – I’m not aware of any energy company who chose to meet their ECO obligation by installing draught proofing. The government also promises that 1 million homes will receive help over the next 5 years. To put that in context there are 4.5 million homes suffering the effects of fuel poverty in the UK right now – you can make up your own mind as to whether the Conservative’s target is ambitious enough.

We can not afford to plod on with what little existing energy policy we have. Globally climate change is there for all to see – locally people are dying because they can not afford to heat their home. So come on Amber, come on Dave, black holes are so 2015 – give all us community focussed do gooders something to get our teeth into this year.

Is there anything good about standing charges?

Standing charges on your energy bills. Those daily charges for gas and electricity that you just have to pay, every day, whether you use any energy or not. We get lots of calls from people with concerns about standing charges and have found that energy companies are often pretty rubbish at letting customers know what they are for and how they work. So I thought I’d write a blog about it.

So what are they for? Standing charges relate to the cost of supplying a property with electricity and, if you have it, gas. You could think of it like a rental charge for using the pipes and wires, whereas your unit rates are for the price of the actual energy that you use.

So what’s the problem with standing charges? Well, there are a few, which some of our members are all too familiar with…

  1. You pay even when you’re not using anything. This one relates to gas. Most households who have a gas supply use gas for heating, hot water and cooking, but some use gas for heating, but cook and heat water with electricity. Assuming you don’t use any heating between around May and October, this means that for five months you aren’t using any gas at all. The problem is that if you pay a standing charge, then this is applied even if not a single unit of gas is used. So if your standing charge is 27p, this could amount to paying over £40 for those months. The problem gets even worse if you have a pre-payment meter because you probably won’t have topped up over the summer and when you do, so you can put your heating on, the meter will swallow up a whopping £40. Great.
  2. Standing charges are not fair. They charge the same amount daily to every household, regardless how much is being used or how many people live there. This means, effectively, that the less you use, the more you pay for each unit – so not a very good incentive to be energy efficient!
  3. Standing charges are confusing. A big part of our job is trying to help people take control of their energy use so that they can save money, get a fairer deal and be more comfortable at home. Standing charges make bills more complicated, and whilst I understand why they’re there, I also think suppliers could do a better job of explaining them to customers and finding ways to avoid the issues highlighted above.

So are standing charges good for anyone?

Yes. If you are a low user, standing charges mean you pay more per unit, BUT if you are a high user, standing charges mean you pay less per unit. This is because the standing charge is the same, per day, regardless how much you use. So standing charges work out better for higher energy users.

Are there tariffs which have no standing charges?

Yes, there are. There are a few companies out there who offer tariffs with no standing charges. We wouldn’t recommend them for everyone, though, because tariffs without standing charges have higher unit rates. This is because the suppliers will always need to cover their costs (and earn a profit!) – so they will either split the costs between standing charge and unit rate, or they will recover all the cost from the unit rate alone. Therefore, tariffs without standing charges are only usually a winner if you are a very low user, or if your house is going to be unoccupied for a significant part of the year, or if you only use your gas for heating.

If you think you might be better off switching to a tariff without standing charges, but aren’t sure, give our team a call on the general enquiries number (01752 477117) and we should be able to help.

Innovations for the solar future

One of the more exciting things about solar technology are its possibilities. Yes, the industry is suffering under the recent and radical changes in government policy but it’s important to look and plan ahead, trying to see what is on the horizon that has a chance of going mainstream and succeeding !

I’ll be blogging some ideas with links for you to explore should you wish.

Here’s the first one !

How about this new shelter – would look in great in our City Centre!

The Lotus Leaf  is an urban design shelter with seats and integrated photovoltaic panels, perfect for green parks and parking areas. It can shelter you from the rain and when sunny produce power ranging from 500W  to 2.8KW depending on the model!

The same company also do a very cool looking pedal assisted electric cycle and a floor lamp called Octopus.