Domestic Utilities Supplies (Hansard, 18 April 2000)

§ Mr. Barry Gardiner (Brent, North)
One of the great privileges of being a Member of Parliament is our link with constituents. Constituency casework can be onerous, especially on top of Select Committee work, but occasionally the two come together in unexpected ways. In those circumstances, the experience of constituents can reinforce parliamentary investigation, grounding the statistics of Government Departments and the National Audit Office in the genuine experience of what it feels like to be on the receiving end of Government policy.
It was precisely such a coming together of theory and practice that prompted me to initiate the debate on the regulatory supervision of the transfer of domestic utilities supplies. I apologise for the length and clumsy nature of that title. I had originally suggested "Doorstep fraud in the sale of gas and electricity", but the Table Office thought it a trifle blunt.
Some 20 million domestic customers in Britain spend around £6 billion a year on gas. Between April 1996 and May 1998, competition was introduced to the domestic gas market and customers can now choose the company that they wish to supply their gas. By February last year, 25 new companies were selling gas and more than 4 million customers had switched from the old monopoly supplier, British Gas Trading. Since April 1996, British Gas Trading has cut its price to the average consumer from £348 to £300 at 1999 prices—a reduction in real terms of £48. That is before factoring in the present Government's reduction in VAT to 5 per cent. on domestic fuel. I welcome that good news.
New gas companies have done even better. Customers who switched saw their annual bills fall not by £48, but by £78 in real terms. That shows competition working to the public benefit. Once again, I welcome that. It has meant a global reduction in customers' bills of £ 1 billion per year. I should like immediately to acknowledge the role of Ofgas—or Ofgem, as it is now—in driving costs down, partly through price controls, partly by nurturing competition.
The House will be aware that on 12 May last year, the National Audit Office published a report—House of Commons paper 403, 1998–99—entitled "Giving Customers a Choice—the Introduction of Competition into the Domestic Gas Market". The report broadly welcomed the introduction of competition, but highlighted certain issues about quality of service. It reported that in 1998 Ofgas and the Gas Consumers Council received 45,000 complaints from the public about gas transfers from one supplier to another.
In paragraph 13, the Comptroller and Auditor General says: One of the main areas concerning customers in complaints received was certain aspects of doorstep selling technique. A number of customers complained that attempts had been made to trick them into entering into contracts and others complained that salesmen had provided misleading information. The report continues: In the light of these concerns, Ofgas modified the suppliers' licences to include rules covering marketing, which they then enforced after earlier attempts to secure effective self-regulation by the industry failed. 180WH That seems to be reassuring. Ofgas acted to modify the companies' licences and set minimum standards.
Not until 45 pages later do we read the more damning follow-up: We found, however, that Ofgas carried out very limited monitoring of the new gas companies' compliance with their licence conditions. Ofgas explained that they had given priority to rolling out competition and now this was achieved they would give more attention to monitoring companies' compliance with their licence conditions. The Director General of Ofgas has indicated that he is committed to increasing the attention that gas suppliers give to their social obligations and to improve Ofgas monitoring of their performance in this area.
When the director general was brought before the Public Accounts Committee on 7 July last year, many hon. Members were keen to press him on that point. My hon. Friend the Member for Liverpool, Garston (Maria Eagle) asked him directly: Can you explain to the Committee how it is that somebody who has never signed any piece of paper can have their gas supply transferred to a different supplier? Mr. McCarthy responded by saying: There are a number of possible explanations for incorrect transfer. Sometimes it is because there has been either an incorrect address or an incorrect individual meter number recorded. Sometimes it is because there has been a clerical mistake.
The innocence is almost touching. However, to give the director general his due, he added, almost as an afterthought: I think sometimes in the early days of this marketing, it was undoubtedly dishonest marketing. Undoubtedly, but not only in the early days. At the Public Accounts Committee meeting, the director general agreed with me that one of the reasons why error transfers took place was that no proof of contract was required by the supplier. All a supplier needs to do is to provide Transco with a meter reference number, or an "S" number, as it is known. When asked how many error transfers occurred each year, Mr. McCarthy conceded that there were something in the order of 100,000.
However, when asked why Ofgas had not done anything to tackle the problem, such as using its position as the industry regulator to insist that some proof, such as a signed contract, should be supplied to Transco before a transfer could be effected, Mr. McCarthy responded: Because I am not persuaded that the additional cost and delay that such a requirement would impose on the system would justify such action. I have no doubt that Mr. McCarthy understands the gas industry better than those 100,000 people whose interests he is supposed to be protecting. However, what those 100,000 people do not understand is why the director general of Ofgem, the supposed regulator, thinks that mis-selling is a thing of the distant past and why, even when they draw his attention to specific cases of blatant abuse and downright fraud, Ofgem seems to be unable even to respond within three months.
On 27 October last year at 6.30 pm, my constituent Mr. Thrale of Kingsbury answered a knock at his door. I shall now give his account of what happened: It was a man who said he was from Eastern Electricity. He had not been invited by me or any other member of my household. 181WH The man asked if I had heard about electricity competition. I said I had. He said that, as I had not moved to another supplier from Eastern Electricity that they would like to write to me about their services and deals. When he asked if I would like them to do that, I said yes (this impressed me as each and every representative from the other half-dozen or so companies that have knocked on my door have all declined to send me any details about their services and company). The man asked for my address. I offered to write it down for him on his form. To save him, and me, time, I did so and returned the form and clipboard to him. He asked for my telephone number. I declined to give him this information. He said that his boss expected him to get this. Again I declined. He asked me to sign the form. I asked him why and he said that it was so that they could send me the information. I replied that my signature was not necessary for that. They could send me information without it. He said that he must legally get it to send the information. I replied that this was nonsense and that the law of the land said that anyone could—and do—send me marketing information. By now I was suspicious. I looked at the form whilst he was talking and saw the word "contract" on it. I asked to see the form and took the clipboard. It was clearly a contract and I noticed a box had been pre-ticked next to the small print statement I would like Eastern to supply my gas. I told him that I was being lied to. I challenged him about this and he said that I shouldn't worry about that. It was a mistake. I took the contract and asked him to leave. Since then I have examined the form more closely and seen that the payment method of cheque/cash has also been pre-ticked. I enclose a photocopy of the form, of which I still possess the original.
Mr. Thrale sent that account in a letter of complaint to Ofgem and to me on 28 October. His letter began, I wish to report a criminal offence. Ofgem sent his letter to the eastern regional office, which sent it to the Gas Consumers Council, which sent it to Eastern Electricity. By 21 January, more than three months later, Mr. Thrale had received no response to the issues that he had raised. On that date, in response to my second letter, Eastern Electricity wrote to me advising that Eastern Electricity, as one of the UK's largest integrated energy suppliers, demands the highest standards of professionalism from every sales adviser who works on our behalf. Immediately following Mr. Thrale's complaint, the sales adviser involved was suspended pending investigation by our marketing department. They have since informed me that the adviser involved has been re-trained, and will be monitored in future to ensure similar complaints do not arise. Furthermore, I confirm that we have cancelled any and all supply agreements relating to the above address. There never were any supply agreements relating to that address.
I wrote back to Eastern Electricity saying that I was astounded that the salesman had been allowed to remain a member of its staff and had simply been asked to go through a period of retraining. I pointed out that in my original letter I had asked that Eastern Electricity check all the other contracts sold by the salesman, as it was unlikely to have been his only misrepresentation. Eastern Electricity did not say whether it had carried out that check or whether any other bogus agreements had been discovered. I said that I was sending a copy of its response to Ofgem to ask it to investigate Eastern Electricity's handling of the matter. That was three and a half months after the original issue of doorstep mis-selling.
182WH Ofgem's response is lengthy, containing 10 long paragraphs over three pages of dense writing, but it amounts to little. It seems to parrot what Eastern Electricity has told Ofgem, stating: As a result of Ofgem's initial intervention, Eastern suspended and investigated the agent concerned. We knew that. It continues: Eastern state that the agent was then retrained and was due to be subjected to close monitoring in order to prevent further such incidents. We knew that. It goes on to say that, At the time of receiving Ofgem's initial complaint on behalf of Mr. Thrale, Eastern state that they had not received any previous complaints about the agent concerned; and for that reason they did not take sterner action against the agent at that time. However, since then Eastern have received further complaints regarding this agent, and as a result, have dismissed him. Further complaints had been received, yet Eastern Electricity had not checked that every contract signed up by the agent had been done properly. The letter goes on in an unsatisfactory fashion.
I shall pass from the case of Mr. Thrale to the even more confusing case of Mr. and Mrs. Dolan. I pay tribute to my office staff—my case worker, Cathryn Evans, and my researcher on the issue, Brad Perilman—because it was a complicated situation. Seeboard thought that it had signed the Dolans up from Eastern Electricity and British Gas for its electricity and gas. It believed that it had a contract with Mr. Dolan, but he had no recollection of signing up with Seeboard. He could not have done so even if he had wanted to, because, according to British Gas, Mrs. Dolan had signed up with it from Eastern Electricity for the electricity supply. Therefore, it was no longer possible for Seeboard to sign up Mr. and Mrs. Dolan from Eastern Electricity. None of the parties knew that, however, because Mr. and Mrs. Dolan were not aware that they had entered into an agreement.
Mrs. Dolan is an elderly lady who has recently suffered a stroke and is still receiving medical attention. She was relaxing in her garden one afternoon, trying to recuperate from her illness, when a charming young man presented himself over the fence and started chatting to her. Apparently, on the basis of that conversation and without anything being signed, her supply was transferred. Mr. Dolan wrote to me in high dudgeon, stating that he could not understand how his supplies had been transferred to Seeboard. When people from Seeboard eventually responded to my calls they produced, after much pleading, a transcript of the conversation, which they said showed that a verbal contract had been entered into. What it showed in fact was that Mr. Dolan was extremely confused about the nature of the conversation that he was having with the person from Seeboard.
Ofgem, the regulator, is supposed to protect people such as the Dolans. Mr. Thale, an acute and intelligent young man, saw what was going on and took action. It took the regulator three and a half months to fail to do anything about compensation, or to investigate that case. The situation for Mr. and Mrs. Dolan is a lot worse. Let us not forget that 100,000 such error transfers happen every year. People may simply be confused about which company they have said that they might like to go with. When asked whether they know that there is competition and that they may be able to get gas 183WH and electricity more cheaply, they say, "Oh yes, we know that." They find out a few weeks later that they are being billed by a different supplier.
The Government must press Ofgem to do its job properly and to ensure that written evidence of a contract is required, so that there are no more cases of telephone conversations with confused, elderly individuals being adduced as the reason for a transfer of supply. Ofgem has done a good job in pressing for competition in the market and in trying to reduce the price of gas and electricity. However, it must take seriously its role of protecting the consumer and ensure that what has been a great boon—cheaper gas and electricity—does not become a nightmare for the 100,000 people every year who fail to understand why they are paying money to people of whom they have never heard.

§ The Minister for Energy and Competitiveness in Europe(Mrs. Helen Liddell)
I congratulate my hon. Friend the Member for Brent, North (Mr. Gardiner) on securing the debate and recognise the passion that he feels in relation to the cases that he has described. I have seen the correspondence relating to the case of Mr. Thrale, but not of the Dolans. I undertake personally to pursue the cases of Mr. Thrale and the Dolans, and I will ensure that the director general of Ofgem receives a copy of my hon. Friend's comments from this morning, to ensure that appropriate action is taken.
My hon. Friend began by saying that it is often a happy happenstance that one's roles as a constituency Member of Parliament and as a member of a Select Committee coincide. I have read his interrogation—if I may call it that—of the director general, and I recognise that his questioning came from a specific angle.
It is also a fortunate occurrence—perhaps happy is the wrong word—when as a Minister I handle issues that I confront as a constituency Member of Parliament. Few Members of the House will not have had cause to consider instances of doorstep mis-selling—not only of gas and electricity, although in those cases the issues involved are still fresh. Many of our constituents remain puzzled about how gas and electricity can be supplied by several different companies, because they are confused about whether the gas has to come through separate pipes. I understand that confusion, on which some people play.
My hon. Friend alleges criminal behaviour. It is important that companies pursue criminal action when there is clear evidence that agents acted in a particular way. I am sure that my hon. Friend recognises that in the first instance that is a matter for the Director of Public Prosecutions. I should like the DPP to prosecute in such cases, but it is not for me to say where the priority should lie in that department.
It is vital that action is taken. The issue has featured in many consumer television programmes. "Watchdog" made an interesting and rather frightening investigation into some of the selling techniques employed on the doorstep. As a consumer, I would not want to be confronted with some of the aggressive selling techniques that have been applied on the doorstep.
We should put the matter in context. I am grateful to my hon. Friend for drawing attention to the extent to which competition in gas and electricity supply has 184WH driven down prices. He and I are of a similar ethnic origin, and are well aware that people who look after the pennies find that the pounds look after themselves. Consumers can be something like £20 better off as a consequence of increased competition in gas and electricity supply. In the vast majority of cases, no problems are experienced in the transfer. However, today we must consider cases in which problems are encountered. Sometimes, such problems are the result of error, and we all recognise that errors are made. However, when I hear of cases such as those of Mr. Thrale and Mr. and Mrs. Dolan, it becomes more pressing to ensure that instances of unacceptable mis-selling are probed much more aggressively.
I am not trying to mitigate or pass the buck for the difficulties experienced by my hon. Friend's constituents, but we are introducing a Bill on the regulation of utilities that focuses on the consumer's role. Until the Bill receives Royal Assent, the legal requirement on the regulator continues to focus on the shareholder before the rights of the consumer. The Utilities Bill will change that, giving the consumer pride of place. A new Gas and Electricity Consumer Council will be created, which will have a much closer relationship with the regulatory authority.
Interestingly, my hon. Friend referred to the regulator by name. That is perfectly understandable, as at the moment the regulator is a single individual. Mr. McCarthy is a talented and experienced gentleman who has taken his work extremely seriously, as have other regulators. However, it is important to depersonalise regulation. The Utilities Bill will create a regulatory authority that will be responsible for consumer interests, backed up by and working with the Gas and Electricity Consumer Council. My right hon. Friend the Secretary of State for Trade and Industry will impose social and environmental guidelines that will dictate the work of the regulatory authority.
My hon. Friend is aware that by changing supplier—even if they did not know that they were doing so—Mr. Thrale and Mr. and Mrs. Dolan might have had an opportunity to benefit from lower tariffs. Sadly, many poorer consumers cannot benefit from better tariffs. My hon. Friend and I share a commitment to ensure that stories such as those of the Thrales and the Dolans should not discourage poorer people. The regulator should be able to help the fuel poor to benefit from competition by driving down their bills.
My hon. Friend will want concrete evidence of how the regulator and the Government can help constituents such as Mr. Thrale and the Dolans. In November last year, my right hon. Friend the Secretary of State for Trade and Industry announced an inquiry into gas and electricity competition, not least because the amount of switching that we had anticipated had not occurred. Other reasons were the lack of balance and the opportunity to examine instances of mis-selling. Ofgem extended its market licence conditions for a further two years and is currently considering responses to its proposal to develop the existing licence conditions for companies. Measures under consideration include a requirement for domestic gas and electricity companies 185WH to have effective management of the sales agents who act on their behalf. In some cases, Mr. Winterton, they are sub-contractors—

§ Mr. Deputy Speaker(Mr. Nicholas Winterton)
Order. The chair is addressed as Mr. Deputy Speaker or Madam Deputy Speaker.

§ Mrs. Liddell
I apologise, Mr. Deputy Speaker. I am used to seeing you in another setting, in which you are always extremely helpful. I shall return to referring to you as Mr. Deputy Speaker.
The consultation will look at ensuring that gas suppliers provide customers who have entered into contracts over the telephone with a copy of the terms and conditions of the contract, which is along the lines that apply for electricity customers. It will also consider extension of the coverage of conditions to sales undertaken in public places, such as shopping centres and over the garden fence, which is relevant to Mrs. Dolan's case. Extension of the conditions will also cover certain aspects of internet sales. Ofgem has continued to seek supplier compliance with the marketing conditions and good market practice by suppliers.
186WH In addition to monitoring performance, Ofgem has been engaged in an active programme of review meetings with suppliers, identifying lapses in suppliers' arrangements and highlighting best practice. A recent industry workshop linked general electricity regulation with overall consumer regulation. That protects the consumer, not least by providing an opportunity for a cooling-off period on contracts that may be signed. Ofgem intends to put into the public domain data on consumer complaints against individual suppliers. That will be done on a monthly basis and for the year to date. It will allow customers and others to establish the relative performance of gas and electricity suppliers. If there is to be proper competition and effective operation of the market, information must be available about how companies conduct themselves. That is a powerful way of ensuring that they behave properly. In another setting, I found it to be of considerable use in concentrating companies' attention on customers with whom they are not dealing properly. A good experience of competitive gas and electricity markets is important in the first instance, which is often on the doorstep. It would be unacceptable if people were deprived of their rights, or lost out on the benefits of competition. I shall consider my hon. Friend's points, and I congratulate him on his contribution.