House of Commons - Public Accounts

Select Committee on Public Accounts Fifty-Second Report

2 Helping consumers to engage with the market

11. To ensure that competition is effective in protecting consumers after price controls have been removed, a regulator needs to be content that consumers are in a position to engage effectively in the market and apply competitive pressure on suppliers.[27] This requires consumers to have good quality information with which to make a decision, to be able and willing to switch suppliers, and, where they experience problems, be able to obtain effective redress.[28]

12. In the energy market, Energywatch provides information to consumers, and Ofgem has relied on Energywatch to ensure that consumer information is accessible, trustworthy, relevant, understandable and comparable. Ofgem also has powers to publish advice or information if it considers it is in the interests of energy consumers, and has published a range of information and fact sheets on its website and runs a consumer phone line.[29] It has also carried out media campaigns encouraging people to switch energy suppliers. Nonetheless, some 20 to 32% of electricity consumers looking to save money on their bills may have ended up switching to a more expensive supplier.[30] Ofgem recognised that the problem had become quite widespread in the last year, for example in relation to prepayment meters, and was examining why that was so.[31]

13. Some consumers—between 1 and 2%—preferred to pay more money in order to have a green fuel provider, and over 15% of consumers had a fixed price fuel supply.[32] But there was also a need to make sure information for customers was clear, which was why Ofgem was conducting its review of mis-selling by RWE Enpower.[33] Ofgem was also considering whether, through their licences, to require energy suppliers to make sure that when they talk to customers they tell them about the cheapest offering available at the time.[34]

14. In the postal market, Postwatch has the function of providing information to consumers, but Postcomm also has a stakeholder engagement programme which includes visits and meetings with consumers and mail users. Postcomm also relies on suppliers to provide information to their customers.[35]

15. In the case of Special Delivery (Next day) for business and account users, where the price control was removed, the users of the service are sophisticated large businesses that have a close relationship with the service provider.[36] Even so, 16% of business postal consumers said it was 'not very easy' and 2% 'very difficult' to find information on the types of services offered. Furthermore, 20% found it 'not very easy' to find information on cost, with 20% not knowing or not having tried.[37]

16. Ofcom has started to provide information to consumers directly, and has said that, where the market does not deliver information customers want or need, it will consider intervention.[38] Ofcom also has a statutory consumer panel.[39] Ofcom accredits companies' internet price comparison services and has created a website, 'Topcomm', which provides comparative quality of service performance indicators for all main telecoms providers.[40]

17. 16% of fixed telephony customers think it is 'not easy' to find out what companies offer.[41] Ofcom has conducted and published research annually into how satisfied people are with the different aspects of their telecommunications service. The research has asked about mobile, fixed and broadband services.[42] The research, based on statistical sampling, has shown that people are quite content, and that customer satisfaction with communications services is high.[43]

18. Around half of all consumers in energy and telecoms have switched supplier.[44] Of those consumers that have switched supplier recently, 89% of telecoms switchers found it fairly or very easy to do so, with an equivalent figure of 86% in gas.[45] Furthermore, 18% of energy customers believe that the switching process requires too much time and effort, and 17% of energy customers do not expect to make savings from switching supplier.[46] Some 70% of consumers would still rather use a familiar trusted company than a new one offering a better deal and 25% of energy switchers do not try and compare prices before switching.[47]

19. Consumers who feel they are not receiving an adequate service must be able to seek appropriate redress. To do so, they need to know who to complain to, or how to seek redress. In the communications sector, Ofcom operates a call centre to respond to queries of this kind. The advice they give customers is to first try and resolve their complaint with their service provider. If customers are not satisfied, then they should use one of two alternative dispute resolution mechanisms—Otelo or CICAS—to which all communications providers must be signed up. Ultimately, if customers are still not satisfied, then they can come to Ofcom for assistance in resolving the dispute.[48]

20. Both Ofgem and Postcomm were given new responsibilities for consumer complaints in the Consumers, Estate Agents and Redress Act 2007. They will become responsible for setting standards on complaints handling by suppliers of energy and postal services and they may also require suppliers to publish information on compliance with these standards.[49]

21. The Act will also merge Energywatch and Postwatch into an enlarged National Consumer Council.[50] While Energywatch and Postwatch had the function of providing consumer information, there is no requirement on the new National Consumer Council to do the same, although it will have the power to publish information on consumer matters.[51] Ofgem was working with the new body to make sure it knew how to deal with complaints and when to send them on to the company. It was also going to audit the new body and if customers were still unsatisfied, they would be able to go to a statutory ombudsman.[52] However, although the merger will take effect in October 2008, when we took evidence from Ofgem on 14 May 2008, less than five months before the merger, it had not yet established who would be responsible for providing information to consumers.[53]



© Parliamentary copyright 2008	Prepared 13 November 2008