Analysis: Companies need to restore trust and good service

MY immediate reaction to this Ofgem report is that the hundreds of thousands of consumers in Scotland struggling to pay their energy bills will find an average annual profit of £125 per customer pretty galling.

Unfortunately, however, we are not in the least surprised. It is yet another reason that explains why Scottish consumers have so little confidence in their energy suppliers.

We have got some empirical evidence, based on work carried out 18 months ago, which demonstrates the low levels of consumer confidence in the energy market. We looked at eight markets in Scotland and energy companies ranked the lowest.

Price must have something to do with it, and the fact that it is a lifeline service. But I think people don’t feel they are getting value for money.

There is no personal relationship between the companies and the customers. They don’t pro-actively seek people out to offer them a better deal. They are huge companies, and customer service is not good. There is also an issue in that people don’t necessarily trust the brand. But they feel they are stuck, because the Big Six have a stranglehold on the market.

The report does say that these sorts of company figures are temporary, but nevertheless it is a significant increase and is a huge amount of money if you are someone on a low income. From our point of view, it is very hard to find out if these profits are excessive or not. There is no transparency. We understand that the companies have got to make a profit, but it is very difficult to look at their accounts to work out if these rises are justified. Ofgem has got forensic accountants pouring over the books of the companies, so hopefully we will soon get some clear information that will tell us whether these rises in profits are justified.

In the meantime, Ofgem has announced its tariff reforms, which are very welcome. For us the key ones are its proposal to look at liquidity in the market and its proposals to make the companies auction off at least 20 per cent of their energy on the wholesale market to break the stranglehold.

Scottish & Southern has announced some plans that go further than that, by auctioning 100 per cent of its power on the wholesale market by next year.

That is a very good first step. The other encouraging thing to have happened is that British Gas has announced that it will stop cold-calling to doorstop sales. If these companies can stick their heads above the parapet, we would hope some competitive pressure is exerted on the others.

These are small steps in the right direction. It is all about being honest and restoring trust. But we need some movement now, because winter is nearly upon us. • Trisha McAuley is deputy director of Consumer Focus, Scotland.