Energy Bill

Memorandum submitted by The Trading Standards Institute (TSI) (EN 35)

HOUSE OF COMMONS PUBLIC BILL COMMITTEE – ENERGY BILL

The Trading Standards Institute (TSI)

The Trading Standards Institute is the UK national professional body for trading standards professionals working in both the private and public sectors. Founded in 1881, it now has over 3,000 members.

Those of its members who are within local authorities enforce, inter alia, the majority of UK consumer legislation.

In compiling this memorandum, TSI consulted its entire membership through emails and the TSI website.

Executive Summary

TSI is generally in favour of the ‘Green Deal’ scheme in principle, but would emphasise that it is essential that the scheme works for the benefit of the trade, the consumer and the environment.

We understand that the 'Green Deal' is due to launch in Autumn 2012, which is a very tight deadline for such a major project, and we would express concern that there should be no shortcuts where the protection of consumers is concerned.

We acknowledge that the Energy Bill is the vehicle for the Government to meet some exceedingly challenging carbon emissions targets. However, in view of the massive investment in the installation of ‘Green Deal’ measures into consumers’ homes, we believe that there is scope for widespread mis-selling and consumer detriment.  

TSI’s comments, therefore, focus on the clear need for consumer protection to underpin the whole 'Green Deal' scheme because without such protection there will be little consumer support and huge potential for consumer detriment, meaning the scheme will lose credibility and will potentially fail.

Our principal concerns are twofold: firstly the potential for mis-selling, and secondly the security of data regarding the Energy Performance Certificates.

Comments

1. The 'Green Deal' documents require that the expected financial savings for the householder, after the installation of measures, must be equal to or greater than the costs of the installation that will be attached to the property’s energy bill; this is the ‘Golden Rule’. However, there have been suggestions that DECC might weaken this guarantee, which is of major concern to Trading Standards. We would wish the savings guarantees to be maintained at the originally proposed level.

The expected financial savings offered by the ‘Green Deal’ adviser must be achievable in all cases. The savings offered prior to a consumer entering into a contract are a very clear statement that will affect the transactional decision-making process. It is very likely that the ‘Green Deal’ advisers will be selling on a part- or full-commission basis, and they could inevitably be tempted to overstate the expected savings in order to make the recommended measures appear affordable to the consumer. This means that the consumer will be financially disadvantaged if the savings fail to fully materialise. Therefore, any formulas used by advisers to calculate savings must be universally applied, robust, and achievable. In theory, if a consumer obtained several quotations under the ‘Green Deal’ for similar measures to be installed, the expected savings figures quoted should be broadly similar.

When calculating the expected financial savings, the calculations must include all necessary servicing and maintenance costs over the lifetime of the measure, as the cost of a product is not just that of installation, but also will include additional costs over its lifetime. A failure to include such costs will render the quoted savings inaccurate, as the consumer will incur additional expenditure. Consumers need to be in possession of all the facts so that they can make an informed transactional decision.

2. If there have been any misstatements made by sales representatives in order to promote a sale, or any over-calculation of expected financial savings, it is likely to be a considerable period of time before consumers notice that the promised savings have failed to materialise. Provisions do not appear to have been made with regard to which enforcement body will investigate such allegations, and how the householder will obtain financial compensation. The ‘Green Deal’ seems to rely heavily on self-regulation, which is of concern to Trading Standards. In addition, we would suggest that there need to be clear provisions for punitive action to be taken against the individuals and businesses that make the false statements.

In order to ensure protection for all consumers who might be affected by mis-selling, TSI would suggest that any rights afforded to the purchaser of the ‘Green Deal’ product should be transferable to any future purchaser of the property, as the current property owner may use the predicted savings as a selling point. For similar reasons, all guarantees and sources of redress for equipment failure must be transferable without payment to all future purchasers of a property to ensure continued consumer protection.

Misleading actions and misleading omissions, as well as aggressive and unfair practices, are offences under the Consumer Protection From Unfair Trading Regulations 2008 (CPRs), which are enforced by Local Authority Trading Standards Services, and also potentially under the Fraud Act 2006, which is generally enforced by the Police and, increasingly, Trading Standards. However, the evidence of any alleged offences arising from the overstating of expected financial savings may only come to light after a substantial time, which may make taking action under the CPRs impossible and create evidential problems unless there is a very clear control regime.

3. TSI believes that, in order to ensure consumers are adequately protected, there needs to be a simple but effective installer accreditation scheme which will contain provisions to ensure adequate consumer protection. Work is already underway in this area, but the regime needs to be as robust as it can possibly be. In particular, the guarantees for the installed measures should clearly state the length of the guarantee, and guarantees should be insurance-backed or underwritten, possibly by DECC. Without such added protection, householders could be financially adversely affected if a measure fails (e.g. a boiler breaks down), but the installer has gone out of business, so that there is no direct source of redress possible.

4. There has been a suggestion that when consumers enter into 'Green Deals' they will be covered by the Consumer Credit Act 1974, and that all providers must hold a consumer credit licence. Assuming this suggestion is correct, TSI would hope that the additional protection available by virtue of Section 75 of this Act should be afforded to consumers.

5. TSI would express concern that if the ‘Green Deal’ energy advisers are linked to the ‘Green Deal’ installers then this may have the potential to increase the risk of consumer detriment. To prevent such detriment we would suggest that consideration be given for ‘Green Deal’ energy advisers being independent of the installers.

6. TSI believes that it is inevitable that the ‘Big Six’ energy providers will be marketing the 'Green Deal' and will therefore be offering advice, installing the measures, and making profits. In order to achieve sales, there are likely to be incentives to consumers (such as special offers and cashback schemes) and therefore the potential for high-pressure sales techniques to be used to the detriment of the consumer decision-making process.

 

TSI is aware of many occasions where representatives from the ‘Big Six’ have provided false information in order to persuade consumers to transfer their energy supply. Surrey Trading Standards Service has recently successfully prosecuted one company and OFGEM is currently investigating allegations of mis-selling by four of the ‘Big Six’. TSI is obviously concerned that there will be further potential for consumer detriment once the ‘Green Deal’ is introduced unless a robust system of control and enforcement is implemented.


TSI has supported the right for consumers not to be bothered by cold calling doorstep traders if they indicate that this is their wish. TSI would therefore like to see a provision in the legislation that ‘Green Deal’ traders will respect local authority ‘No Cold Calling Zones’ and individual and clearly worded door stickers which indicate that consumers do not deal with cold callers. This provision already exists in the code of practice issued by the Energy Retailers Association and its provisions could be easily copied.

7. TSI believes that there must be a system of mandatory independent random checks once the ‘Green Deal’ measures have been installed. Potentially this could be something required during the process (maybe by the finance provider before the cash is released to the installer), but the checks must be properly resourced, carried out by experts, and the results shared with enforcement bodies, such as Trading Standards, which can monitor the results. This will ensure that the work charged for is actually carried out to an acceptable standard, and will reduce the potential for consumer detriment and criminal offences.

8. TSI is also concerned that homes may end up being ‘over-insulated’ as consumers are encouraged to purchase more ‘green’ measures. It is possible that excess insulation could actually lead to ‘sick building syndrome’ where there is inadequate fresh air exchange and this, in turn, may lead to condensation and mould. TSI believes that research should be conducted on this issue if it has not been carried out already.

9. With regard to the register of Energy Performance Certificates, TSI has a number of concerns, and believes that a number of measures should be included, via Regulations, to support the protection of consumers:-

(i) access to data on the register must be tightly restricted with heavy criminal sanctions for abusers;

(ii) data released should not extend beyond asset ratings and address (i.e. personal data, such as names, should not be released);

(iii) all approaches to householders should be carried out following timely notification to, and consultation with, local Trading Standards and Police, with lists of properties to be approached being provided well in advance;

(iv) methods of approach, copies of letters, and sales scripts should be made available to local Trading Standards and Police in a timely manner for advance scrutiny (to ensure they do not contain misleading information or breach any consumer protection legislation);

(v) all paperwork (advertising/corporate material, customer contracts, etc) must be vetted for legal compliance by the Primary Authority/Home Authority Trading Standards Service of the ‘Green Deal’ operator;

(vi) information should only be released to ‘Green Deal’ operators that have been properly vetted (by DECC) for inclusion in the scheme; and

(vii) there should be an independent body to oversee the operation of the ‘Green Deal’ and the activities of participants (similar to OFGEM) to which consumers may complain if they have any issues with the companies approaching them.

TSI believes that such measures are the minimum essential to prevent the abuse of the scheme by the unscrupulous individuals or businesses wishing to mislead the consumer for financial gain.

June 2011

Prepared 22nd June 2011