Energy and Climate Change CommitteeWritten evidence submitted by Barry Rosindale

I trust that you will favour me by reading the following, which highlights the scandal of the Domestic Bulk Liquid Petroleum Gas market.

During the many years that I have been a victim of this scandal, I have written at various times to, The Secretary of State for Energy and Climate Change, The Energy Minister, my MP, my MSP, The Office of Fair Trading, The Competition Commissioner, the Press and Trading Standards expressing outrage; it was if the issue was only of marginal interest to an insignificant few. This lack of positive response is in spite of an estimated 150,000 mainly rural customers, many of whom are being driven into fuel poverty, of what is still effectively an unregulated market.

Prior to the Competition Commissioners Order in October 2008, suppliers were able to effectively hold their customers to ransom by over long contracts and high costs for removing and reinstalling tanks. In that these issues were addressed it was welcome. However, inexplicably the Competition Commissioner argued that it was in the interest of the market that suppliers did not have to publicise their prices.

When the Energy Minister required the OFT to carry out a Market Study into Off-grid Energy Supplies in 2010 he was principally concerned about the critical press publicity regarding domestic heating oil costs. The OFT were reluctant to re-examine the effect of the CC’s Order but had to concede that the confidential pricing of Domestic Bulk LPG was not acting in the interests of customers. In at least the case of Flogas, the OFT came to an agreement that customers could be released from their contract if a proposed price rise was disproportionate to the “Platts LPG Price Index for Northwest Europe”. The OFT did subsequently confirm to me that such an index was internal to the LPG industry and unavailable to the general public; they suggested that I could ask the supplier!

Let me illustrate how the market has worked for me in 2012. My 2 year contract with Flogas had 6 months to run when I was notified that my price was to increase from 49 pence/litre to 56 pence/litre. Dissatisfied with Flogas’s reason for the increase, I decided to exercise my right to switch supplier. Through an intermediary, Avantigas offered me 43.5 p/l, fixed for 9 months. Flogas were determined that they would not release me from the contract. However, Avantigas told me that they would honour the offer of 43.5p/l in six months time when the contract expired. Meanwhile, Avantigas inspected the tank and agreed to purchase it and I investigated how one supplier could under-price another by over 20%. I had to conclude that if both companies purchased gas from the Mossmorran refinery, and Avantigas were making a commercial profit from a sale of 43.5 p/l then Flogas were exploiting their position and considerably overcharging. As the contract termination was approaching and Flogas learned that I was determined to switch, I was offered the opportunity to keep my March price. I turned it down and a little while later was offered 45 p/l, which I also turned down. During the last month of the contract I received an unsolicited Supply Agreement from Flogas offering me exactly the same price as Avantigas, namely 43.5 p/l. My suspicions of collusion were aroused and then confirmed at the end of the month when Avantigas suddenly announced that they could not accept the tank because “Flogas could offer no recent history of maintenance of the tank”. When I questioned the regulatory basis of this decision I was subjected to evasion and finally silence. I had no option other to sign up again with Flogas.

Why am I bothering you with this issue if the end result is that my price from the same supplier has gone down rather than up? It is because, whilst I can and do fight my corner, I can cite the case of a neighbour who is paying 59 p/l to Macgas, now acquired by Flogas, and too afraid to challenge price rises when they inevitably come along. Two tanks in adjacent gardens supplied from the same refinery and now the same supplier, Flogas; yet a price increase on mine of 35%.

If the price charged for domestic customers from electricity or natural gas were permitted to be confidential between supplier and individual customer, I feel confident you would ensure price transparency pretty quickly. What is so different about domestic bulk LPG? If you do not take up this issue and be determined to ensure fair pricing, who is left to protect vulnerable consumers in a market that is still effectively unregulated?

February 2013

Prepared 26th July 2013