Memorandum submitted by Dr Noel Olsen
(FP 31)
A CASE FOR
A "FAIRTRADE"
TARIFF
At present many people, particularly many vulnerable
elderly and very elderly people, are on legacy energy tariffs
and have benefited less from competition. They are paying far
more than they need for their energy. Large numbers of vulnerable
people do not use the computer or direct debit, and many have
been miss-sold energy in the past by unscrupulous traders when
Ofgem was consumer inactive and dogmatic about unbridled competition.
Others will have heard stories of miss-selling or are simply change
(or risk) averse. As a result they remain locked into tariffs
which are far higher cost than those available to computer literate
people who are prepared to shop about. No MP will be unaware of
constituents or even members of their family in this situation.
Such people and particularly the very elderly
have been inadequately regulated for by Ofgem whose assumptions
until recently seem to have been that all competition is good
and that as a regulator they need not concern themselves with
protecting vulnerable people.
I feel the committee should consider the advantages
of a "fairtrade" tariff under which everybody could
elect to have their energy supplied on a regulated tariff which
while it would not be the absolutely cheapest would be monitored
by Ofgem and "fair" to supplier and consumer. All those
on legacy tariffs should automatically be transferred to this
"fairtrade" tariff and those who have not switched for
more than 2 years should be given an "opt out" rather
than "opt in" transfer to such a tariff (appropriate
safeguards would enable those who stipulate particular issues
such as sustainable energy sources). Such a scheme is not much
different to the arrangements that Ofwat currently has for water
bills.
Ofgem would need to advise whether there should
be single "fairtrade" tariff across the country with
the risk of a massive single supplier, or whether each company
would be required to provide one. If the latter they would have
to determine the maximum tolerated variation in "fairtrade"
tariffs if any.
I believe that such an approach would deal with
the massive social injustice where the most vulnerable tend to
pay far more for energy than their better informed neighbours.
It would also require Ofgem to actively protect vulnerable and
passive consumers.
February 2010
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