Conclusions and recommendations
1. Regulators rely on consumers' ability to
switch suppliers in order to put pressure on suppliers to provide
lower prices and better service, but a survey of electricity consumers
who had switched found that about a quarter had inadvertently
moved to a more expensive supplier.
Ofgem should commission research to establish the scale of this
problem, to determine if it extends to gas customers as well,
and to identify the obstacles that have prevented such customers
from getting a better deal by switching.
2. Around one in six customers complained
that it is not easy to find out what companies in the telecoms
sector offer. Ofcom should commission
research to establish whether telecoms customers are having difficulties
similar to those of gas and electricity customers, and also inadvertently
switching to suppliers who are more expensive than their previous
supplier.
3. Ofgem believe that prepayment meter customers
are paying more for their energy than is justified by the additional
costs of the meter. In 2005, we recommended
that suppliers should not discriminate against pre-payment meter
customers. [2]
Ofgem should investigate why companies appear able to charge these
customers more, and whether the apparent discrimination against
them represents an infringement of the companies' licences, or
of consumer protection or competition law.
4. As long ago as 2000, we recommended that
Ofgem take action against mis-selling by energy companies, but
this abuse continues to occur.[3]
Ofgem has imposed fines on some companies but these have been
small in relation to the companies' turnover. Ofgem should not
hesitate to use the powers given to it by Parliament to impose
heavy fines where the circumstances justify them in doing so.
Ofgem should also impose an obligation on suppliers to give customers
balanced and appropriate information reflecting their needs, analogous
to the obligation to provide best advice operated in the financial
services sector.
5. Ofcom requires suppliers to have redress
schemes, but it is often difficult for consumers to know how to
complain about service levels and to seek redress.
Ofcom should audit companies' compliance with these schemes and
commission research to confirm that the schemes are operating
correctly, for example, using mystery shoppers, and that knowledge
of how to use them is getting through to customers.
6. Prices of gas and electricity have risen
rapidly in the recent past, and almost doubled since the start
of the decade. Businesses and consumers
need to be confident that markets without price controls are being
effectively regulated and working well, especially at a time of
rapidly rising prices. Regulators should regularly monitor business
and consumer confidence in the market and its regulation so that
they can respond quickly if confidence falls.
7. Ofgem can only obtain key information on
the operation of the market, such as suppliers' margins and their
purchasing strategies, if it launches a formal probe into the
market. Ofgem has now launched such a
probe, but we are concerned that it took so long. Ofgem and other
regulators should establish clear principles for using their market
investigation powers, such as when rapid or large price increases
occur, especially when they take place across the market.
8. Ofgem and Postcomm rely on specialist consumer
bodies in their industries to provide consumer information, but
close to the launch of the new National Consumer Council, Ofgem
has still not clarified who will be responsible for providing
consumer information. Ofgem should establish,
as a matter of urgency, the respective roles of itself and National
Consumer Council regarding consumer information.
9. Postcomm was not able to assess fully whether
to remove the price control on Special Delivery for business and
account customers because the Royal Mail's competitors did not
require licences, which meant that Postcomm had no powers to require
them to provide it with information. Where
regulators lack the power to require companies to provide them
with the information they need to make decisions, they should
seek to obtain this information voluntarily, and not hesitate
to come back to Parliament if they feel that their powers are
inadequate.
10. Postcomm published three important documents
almost immediately after our hearing, without informing us that
publication was imminent, or alerting us to what these documents
contained. The documents had a direct
bearing on the matters on which we had questioned Postcomm, and
their imminent publication should have been drawn to our attention.
We expect witnesses to give the Committee full and frank answers
to our questions, and Postcomm was mistaken in not telling us
more on this occasion.
2 Committee of Public Accounts, Thirteenth Report of
Session 2004-05, Ofgem: The Social Action Plan and the Energy
Efficiency Commitment, HC 442 Back
3
Committee of Public Accounts, Eighth Report of Session 1999-2000,
Ofgem: Giving Customers a Choice-The Introduction of Competition
into the Domestic Gas Market, HC 171; Eleventh Report of Session
2001-02, Ofgem: Giving Domestic Customers a Choice of Electricity
Supplier, HC 446 Back
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