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Gas and Electricity Supplies
Motion made, and Question proposed, That this House do now adjourn.--[Mr. Touhig.]
7 pm
Mr. Bob Blizzard (Waveney): Like most people, I have always despised rip-off salesmen, whether it be the person who persuades people to part with money for something that is not worth what they hand over, or one who gets people to buy when they do not want to buy, or when it is not in their interest to buy. I have always been wary of the door-to-door salesmen or the street-corner seller, but many consumers are not. All too often, those rogue salesmen prey on the most vulnerable and poor sections of society. For as long as there have been markets, there have been rogue salesmen. They have always been seen as a menace but, these days, we expect the authorities to stamp out that activity, difficult as it is.
Mis-selling is bad enough for any goods or services, but when it happens with the essentials for life, such as gas or electricity, the power sources for every home in the land, it is unacceptable. Given the history of salesmanship, we should have expected mis-selling once gas and electricity supply became open to competition. It is happening.
I highlight some of the evidence that my constituents have brought to me and that I have discovered. Towards the end of last year, I identified some 17 cases in my constituency, in little more than a couple of weeks. The most common trick is the unsolicited telephone call, after which, whatever the consumer has said, he discovers some two to three weeks later that his gas or electricity supply has changed to the new company under an alleged oral agreement.
I give the example of one pensioner who wrote to me at the end of October:
- Can you help me please? Some time ago a company rang me and wanted to supply my gas as against my then supplier British Gas. To get rid of them I said I would look at their offer if they sent me all the details, then forgot all about them. Two weeks later I had a letter from my supplier regretting that I left them.
Another elderly constituent had the same experience with PowerGen, even though he had told the caller that he was definitely not interested. Another 83-year-old man, too deaf to engage in a proper telephone conversation, told a sales representative that he could not hear and asked for some papers to be sent, so that he could read about the offer. He was switched to PowerGen, again without his permission or knowledge.
That constituent's daughter made a number of calls to complain, but was told that the switch would go ahead as authority had been given on the telephone. Eventually, after I got involved, an apology was sent by the company. In fact, I learned that, just two days ago--I suspect after the existence of this debate became known--the gentleman received some £250 from PowerGen and two free videos. Whatever else the debate achieves, I hope that it has achieved something for that constituent.
The worst case that I came across involved an 84-year-old man with a couple of hearing aids and several illnesses. He was visited by a rep from Southern Electric, who asked whether he could read the meter. He then
asked whether he could sit down and fill in the rest of the meter-reading form, and asked several questions. Finally, he asked my constituent to sign to say that the meter had been read. He did. Of course, he later discovered that he had signed a contract to switch his supplier. Thankfully, that salesman was dismissed by Southern Electric.Another type of scam that I have discovered involved a constituent who bought a property in Leicestershire for use by her student youngster. She wanted it to be supplied by British Gas because of its terms and agreed that supply be transferred to that company from the existing company. A few weeks later, she learned that British Gas was not going to supply her because someone had transferred the property to another company. British Gas did not know who had done that, but later told her--off the record--that it knew about the scam. It said that a salesman would watch for empty properties and then fill in a transfer form, using the name of the previous owner. The gas supply is then transferred to the new company. When my constituent contacted Ofgem, she was told that supply to the property had been transferred to NPower. That company said that it had been transferred in error.
I put something in the local press about these complaints to alert my constituents to the problem, and the story achieved good coverage. However, I was eventually approached by another man--not a victim of mis-selling, but a salesman for NPower who had seen activities such as I had described being carried out. He could not stand it any more, and he wanted to blow the whistle. He gave me an insight into how such companies worked.
My informant was able to confirm all the tricks that I have described, but he also told me of how salesmen target low-income areas, where lots of people have pre-payment meters. Salesmen are not supposed to sign up people on such meters, and no commission is offered for such business. However, many people with pre- payment meters are the easiest to convince that they should change supplier.
I was told that salesmen would not tick the boxes on the application form that ask potential customers about pre-payment meters and preferred methods of payment. They fill in the rest of the form and get the resident to sign it. When they have left the property, they tick the box for quarterly payments.
Commission paid to salesmen cannot be clawed back after 60 days. Salesmen rely on the fact that residents are unlikely to discover that they have been transferred to the new company for quarterly payment until they receive the quarterly bill some 90 days later. Residents will have been paying by pre-payment card for that period, and are very angry when they receive a bill in addition. However, the salesman involved by that time will have got away with the scam.
Representatives of Ofgem told me this morning that the company did not see how that could happen. However, I checked with my informant and he assured me that salesmen working for his old company are involved in that scam, and that they are earning commission in that unlawful way.
Salesmen also give the impression that people who buy from NPower are buying directly from the generator, and therefore saving money. No comparative rates or prices are given to customers, and they are not quoted in the presentation pack. Sometimes, salesmen know that customers will pay more if they change suppliers.
The commission structure used by some companies merely gives salesmen the incentive to sell more deals, rather than solid deals. They get £7 a deal if they sell four or five contracts a day, but £12 if they can get the number of deals up to nine or more. Many salesmen are employed through an agency, which means that there is less control and a greater likelihood of sharp practice.
My informant told me that he attended training sessions, at which he could see that all the members in his group knew what was going on. That included the supervising managers, some of whom had been recruited from door-to-door salesmen. The managers are paid by means of a huge commission, which encourages them to reach a certain target every week. Some of them do not care how that target is reached. It is clear that, in some cases, managers collude with corrupt salesmen to make victims of customers.
The best proof that salesmen know what is going on emerged when the manager of the group of salesmen operating in my locality saw the local press coverage of the problem. He took the article to the next sales meeting and told the salesmen to stay away from Lowestoft for a few weeks until the MP settled down.
There is a culture of mis-selling, and salesmen have their own language. Apparently, the term "one-legger" describes a contract that is signed as easy as pie on the doorstep, and for which the salesman does not have to supply any information because he has one foot in the door. The term "blagging" is used to describe a salesman saying anything that he likes to secure a contract. In fact, when I was doing the research for this debate, an Officer of the House told me that his wife had recently been told on the telephone that British Gas had gone bust. The caller asked whether she would like to change her supplier. That must be an example of blagging.
What is being done to tackle the problem, and what more needs to be done? Is Ofgem effective in that respect? I met representatives from Ofgem this morning and listened to what they had to say. As I said in my introduction, for as long as there have been markets, there have been rogue salesmen. Therefore, as soon as the supply of gas and electricity was open to competition, we should have expected this. It is astounding that the previous Government put so little in place to protect the consumer when gas was deregulated in 1996.
It is not surprising that in 1998 Ofgas and the Gas Consumers Council received 45,000 complaints from the public about the transfer from one supplier to another. That figure comes from the National Audit Office report of May 1999. At that time, the NAO was concerned about doorstep and telephone selling techniques. By that time, electricity had been deregulated as well and some companies were selling both. The greater the scope for a bargain, the greater the scope for the rogue salesman. We know that new licensing conditions to include rules covering markets were introduced by the regulator in 1998, but the 1999 NAO report found that little monitoring of compliance was carried out.
As my constituents' complaints show, the problem is still alive and kicking. I learned from Ofgem this morning that complaints against companies had halved last year and that they represented only a small percentage of the new contracts signed. I believe that Ofgem is
underestimating the complaints because some people complain directly to the companies and some go elsewhere. Whatever the figure, it is not much consolation to those who are tricked or inconvenienced.I heard today from Suffolk county council trading standards office that it is still very concerned at the scale of mis-selling in Suffolk. I have no doubt that Ofgem takes complaints seriously and investigates them thoroughly as, no doubt, will the new organisation Energywatch. However, it seems to be involved in reactive monitoring. Notwithstanding the enhancements of the rules announced yesterday, I should like to see stronger measures in place. I should like to see a standard established to ensure that Energywatch responds to complaints urgently.
In taking up my constituents' complaints and studying their correspondence, I have found that the utility companies and Ofgem are often slow to respond and lacked urgency. Every salesman should be obliged to provide in writing the free telephone number of Energywatch and should point out to customers that they can obtain comparative information on prices before they sign the contract. We should insist on a written contract before the supply is changed. There should not be oral or telephone contracts because it is not like buying a concert ticket with a credit card.
There should be conformity of sanctions against rogue salesmen. Some companies take action, whatever that might be, and some retrain them. I believe that, in all cases, dismissal should be the norm and that further sanctions should be applied where necessary. There should be a blacklist. I was told of four NPower salesmen who were sacked and simply joined Eastern Electricity. All companies should conform to enable all customers to get a quick reversal when they realise that they have been tricked. There should be a standard minimum amount of compensation for each victim of mis-selling. When I discovered that my constituent got £250 from PowerGen, it made me think what might happen if everybody who complained received £250. It might focus the minds of the utility companies.
I wonder whether the order to give Ofgem the power to fine offending companies, which needs to be made under the Utilities Act 2000, can be introduced as quickly as possible. If companies know that tough new measures are coming in, they usually clean up their act in advance. That has not yet happened in all cases. Tougher action is needed. It is clear that the regulator has not yet brought all companies under proper control and that not all companies have their management and salesmen under proper control.
I am pleased that one of the companies I have mentioned today is being taken to task in a major way. Ofgem needs to set targets for a reduction in mis-selling complaints. During my meeting with Ofgem representatives this morning, they seemed reluctant to do that. I hope that my right hon. Friend the Minister can encourage the regulator to set itself a target for reducing the number of complaints year by year until they are eliminated.
As I said before, the worst aspect is that the salesmen prey particularly on the vulnerable and the elderly. In the 1980s there were the double-glazing salesmen; in the 1990s there was mis-selling of pensions and mortgages. At the end of the millennium, in the past few years,
we have seen the mis-selling of utilities. It is the same type of villain and the same kind of menace to ordinary people in each case. They must be stamped out, and I hope that this debate will help that process a little.
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