Tag Archives: OFGEM

Consumer Affairs, Energy, Government, Society, Technology

Smart Meters: Energy giants can remotely cut supply

HOUSEHOLD METERING

ENERGY giants can use smart meters to cut the power supply to homes and force customers to pay their bill up front.

It is now known that suppliers have the power to switch the new digital devices to a prepayment setting without visiting the house.

This would force the occupier to top up their account before they use any gas or electricity – and if their balance runs out, their power could automatically be cut off.

More than 11million smart meters have been installed across the country as part of a national upgrade programme ordered by the Government.

. See also Smart Meters and the ‘hidden agenda’

The new meters automatically send readings to suppliers as often as every half an hour and show customers in pounds and pence exactly how much energy they use.

The aim is to make bills more accurate and help customers save money by encouraging them to reduce their power consumption. Experts warn, however, that smart meters give firms unprecedented power over their customers, including access to reams of data about how and when customers use energy and the ability to control a customer’s supply remotely.

Major energy companies said they had not yet used the feature, but admitted it was possible.

A spokesperson for auto-switching service Look After My Bills, said: “Suppliers now have a frightening level of power to hit customers in the pocket. In the past, the Big Six have proven far too eager to force expensive prepayment meters into people’s homes – despite warnings from OFGEM that they should only ever be used as a last resort.

“If they can switch someone to a prepayment meter with a flick of a switch whenever they choose, this is very worrying for families across the country already struggling with unfair price rises.”

A prepayment meter works like a pay-as-you-go mobile phone in that customers have to top it up with credit before they can use any power.

They are most commonly found in households where the homeowner or occupier is struggling financially, because they provide a better means of controlling how much is spent on energy.

Energy firms said that one of the benefits of new smart meters is that they can switch a meter from prepayment to the more popular credit setting remotely.

Energy watchdog OFGEM has strict rules on when suppliers can force customers to have a prepayment meter.

It is supposed to be a last resort when recovering debt, and suppliers should put households on to repayment plans first.

Currently, power companies need a warrant to install a prepayment meter against a customer’s wishes because they need access to their property. But if suppliers can switch someone’s meter remotely it would remove the need to go through the courts.

Under OFGEM rules energy firms would still have to show they had done everything possible to avoid forcing someone to have a prepayment meter and take steps to ensure that any vulnerable customers are protected.

An OFGEM spokesman said: “For suppliers that are considering if it is appropriate to offer prepayment to smart meter customers, the same rules apply as for those on traditional meters.

“Suppliers must be clear in their communications and establish that prepayment is practical and affordable for a customer. OFGEM would take any breach of these rules by a supplier very seriously.”

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Britain, Consumer Affairs, Economic, Energy, Government, Politics, Society

Addressing the massive public concern over rising energy bills…

ENERGY SUPPLY FIRMS

The Government has made known its intention to make it a lot easier for energy consumers to switch their supplier. Ed Davey, the Energy and climate change secretary, wants consumers to be able to do it within a day instead of the present arrangements which can take up to five weeks. Mr Davey’s suggestion certainly sounds like a positive move and one which will be embraced by all energy customers seeking better deals elsewhere in the market.

But is the real issue not more to do with consumer inertia and one that is caused by the belief that banal paperwork is tedious and that some cost may be involved, rather than the time taken to complete such a move? If so, then the additional competition which the Government is craving for – which should drive down prices – may not occur at all.

Of more significance, though, is Mr Davey’s plan to make the probing of the accounts of the ‘Big Six’ energy supply firms a lot easier. They have been accused and arraigned of utilising networks of subsidiary companies to purchase and sell fuel and services – effectively from and to themselves. This has allowed them to inflate prices and to boost profits while claiming that they are faced with soaring costs.

Whilst more transparent accounting practices could put a stop to this, a cautionary note would also be required to be issued. Based on recent experience of other big corporates’ activities, however clever state legislators and the tax authorities think they are, big company lawyers and accountants will always be one step ahead of them. That is pretty much a given.

But in a politically astute move, Mr Davey is also considering increasing the size and weight of the political baton he can wave at energy companies. This could lead to their executives being liable to face criminal prosecution if the evidence proves that they have been engaged in unfair and illegal price-fixing, as well as bill-inflating practices.

Most of the action that can be taken against companies to punish such activities is currently undertaken by regulators. This is done for the very good reason that regulators have a sophisticated understanding of the very complex methods that companies use. Because of that, the financial penalties and fines that OFGEM and other public regulators impose are rarely challenged.

Some commentators may argue that putting that material in front of a lay jury and expecting them to understand it, and following it through a trial which may last for several months, might be a sanction too far. Complex fraud trials are few and far between because of this very problem. However, if executives know that some underhand and deceitful practice might lead to such a trial with all the public ramifications and consequences that could follow – including imprisonment – it could also be a powerful deterrent.

In a game of fast moving politics, politicians are attempting to outbid each other in seeking to address the energy crisis problem. But action which brings results in the form of lower bills for consumers as opposed to instant popularity and votes should be the guiding principle.

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Britain, Environment, Government

Energy firms heavily criticised by MPs on the Energy and Climate Change Committee…

ENERGY FIRMS SLAMMED

A major report by MPs has warned that swingeing green stealth levies on energy bills are ‘perverse’ and should be scrapped.

MPs also call for middle-class pensioners to lose their winter fuel allowance, with the savings redirected to help low-income households insulate their homes.

They have also attacked the regulator OFGEM for failing to hold giant energy firms to account for soaring prices.

The findings were delivered in a report by the Commons energy and climate change committee, which warns that, based on Government estimates, green levies will add a third to electricity prices by 2020 – even before likely rises in wholesale prices are factored in.

The Government has been accused of using stealth taxes to fund the huge subsidies given to green energy firms. These are needed, ministers say, to meet controversial carbon reduction targets set by the last government.

But MPs on the Commons energy and climate committee have warned that most families have no idea that the green energy drive is costing them dear. Their report states:

… There is no widespread understanding by consumers of how much of their bills is made up of levies.

The average family pays £1,267 towards energy bills, with £112 comprising green taxes – £18 of which is directly spent on subsidising giant wind farms. By 2020 the contribution will have increased by more than 150 per cent, with each household estimated to pay £286 as part of their bills, according to the Department for Energy and Climate Change.

The committee’s report also says:

… Increasing use of levies on bills to fund energy and climate policies is problematic since it is likely to hit hardest those least able to pay.

MPs on the committee suggested that if the green subsidies are to continue they should be funded through the tax system which is more transparent and ‘less regressive than the levies’.

The report questions the repeated claims by ministers that families will see lower bills as a result of Government policies, which include measures to promote energy efficiency. The committee is calling on ministers to start an ‘honest conversation’ about the fact that energy bills are highly likely to continue to rise.

Since 2007, average prices of gas and electricity have increased by 41 per cent – 20 per cent in real terms – leaving millions of households in ‘fuel poverty’. MPs warned that the public’s ‘deep mistrust’ of energy providers will continue unless they show greater transparency and reassure households that high prices are not fuelling excessive profits.

The Renewable Energy Foundation, a think tank, says there is little or nothing to be said in favour of energy bill levies. They hurt the poor most, they reduce competition in the energy markets and make supplier-switching less effective. The Energy Foundation says that because the levies camouflage government taxation they reduce democratic accountability.

Green taxes account for nearly 10 per cent of energy bills. They include an EU-imposed levy on industry and power generators for each tonne of carbon dioxide emitted, the cost of which is then passed on to consumers.

Customers also cover the cost of energy companies’ obligation to source more electricity from costly renewable sources – such as offshore wind farms and biofuel, to reduce fossil fuel use – and the requirement for suppliers to install free or subsidised heat saving measure, such as loft insulation or draught-proofing.

Whilst David Cameron has ruled out any change to the winter fuel allowance before the election in 2015, the report by MPs re-opens the debate over whether better-off pensioners should continue to receive the payment which is worth up to £300 a year. The cross-party committee is urging ministers to introduce ‘better targeting of the winter fuel allowance through means-testing’ and to consider ‘how savings could be used to boost investment in energy efficiency programmes’.

MPs also said they were ‘disappointed at OFGEM’s slow progress’ in forcing the energy giants to reveal how much they are making from household bills.

The regulator must ‘use its teeth’ and force energy firms to explain the reasons behind price rises, the report says.

Energy firms were also criticised for ‘falling far short of what is required to increase transparency’ as well as failing to improve consumer trust.

But Energy Secretary Ed Davey has rejected the suggestion that ministers were misleading the public over the impact of green measures on bills. He said:

… Our policies to support renewable energy and reduce energy waste are insulating consumers from the rising cost of fossil fuels.

… And by 2020, our analysis shows household energy bills will on average be £166 lower than they would if we did nothing.

COMMENT

After years of relentless price rises, families across Britain are already struggling to pay electric and gas bills which, on average, include £112 in green taxes and levies.

Yet, as Westminster’s climate and energy committee has warned, this crisis is to get much worse – with the value of these ‘perverse’ levies rocketing by 150 per cent between now and 2020.

On countless occasions, government ministers and supine regulators have promised they will force energy companies to introduce simplified, easily comparable tariffs and bills the public can readily understand.

Yet still the obfuscation goes on. As utility charges soar – along with profits for the Big Six – customers remain saddled with indecipherable bills that leave them dumbfounded over whether they are getting the best deal. Charitable organisations, including the Citizen’s Advisory Service, are receiving record numbers of calls from desperate households struggling with debts, after energy bills have rocketed by as much as 40 per cent in real terms since 2007.

And with yet more increases threatened on top of the 11 per cent so far this year, those on fixed low incomes will suffer the most. How much longer can the authorities stand by while this ruthless exploitation continues?

There are many things that could be done. For instance, minsters could scrap the posturing green taxes that already add £112 to average bills. This could be done at a stroke. The regulator, OFGEM, could also do far more by ensuring gas and electricity companies are more transparent and straightforward in their dealings.

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