Jeff Salway: Simpler, clearer bills a good start – but lower bills would be better

IF YOU were listening very closely last Thursday morning you may have heard a penny dropping.

It’ll be little consolation to the many households forced to think twice about switching the heating on this winter, fearful of the biggest energy bills they’ve ever been landed with. But in a rare dose of humility British Gas conceded that the energy industry had lost the trust of its customers. It also admitted that it hadn’t “made it easy” for its customers, which might be the point at which that penny began to fall.

British Gas revealed that in a move to simplify its pricing it will now offer just one variable tariff and one fixed tariff. It also promises to make its bills easier to understand by giving households a run-down of the costs. In that sense it is learning from the emergence of smart meters, growing in popularity largely because their transparency helps people work out how their energy costs are building up.

Moving to a different deal isn’t easy when you can barely identify which tariff you’re already on – and there are more than 400 on the market – so British Gas has taken a step in the right direction. With Ofgem pushing energy companies to be more transparent in their tariffs and billing, others may now follow suit.

All very encouraging – but it needn’t stop there. The big six suppliers will not have been impressed by emerging energy firm Ovo last week, It delighted customers and ruffled industry feathers by cancelling a January price rise after a drop in wholesale costs undermined any justification for it.

About 10,000 customers on Ovo’s variable rate deal will no longer suffer a 3.5 per cent price hike that would have raised the average bill from £1,120 to £1,158 a year.

The chances of the bigger suppliers following suit are virtually non-existent. Given their scale it’s too much to expect the big players to cancel future price rises and those announced in the summer have already been implemented.

But with wholesale gas prices – which suppliers are quick to pass on when they rise – falling by more than 16 per cent since the summer, a spring round of domestic energy bill reductions should be on the cards.

Don’t hold your breath though, and don’t be surprised if wholesale gas prices mysteriously begin to slip down the list of excuses for price hikes. In the midst of its charm offensive British Gas was at pains to warn that bills would be forced up over the next five years by “increasing commodity costs, increasing distribution costs and increasing green levies” over which it has no control.

If wholesale costs continue to fall and that change isn’t passed onto households by next April, suppliers won’t be getting any pats on the back for admitting they’ve lost our trust.

Investors are still losing out on better performance because their financial advisers refuse to recommend investment trusts.

Sales of unit trusts and open-ended investment companies (Oeics) easily outstrip those of investment trusts, and while many may deny it, that’s largely because investment trusts rarely pay commission to advisers.

Even firms as big as Hargreaves Lansdown continue to favour unit trusts. The UK’s biggest broker claims that it doesn’t like the discounts and premiums at which investment trusts are traded, although with founder Peter Hargreaves, pictured, last year dismissing them as “fuddy duddy” investments it seems the firm’s distaste for trusts goes a little deeper.

They’re entitled to their opinion of course, but the problem is that, judging by the figures, it’s their customers who lose out as a result.

Investment trusts have outperformed unit trusts in seven of the eight major sectors over the past one and five years, according to research by Winterflood Securities.

They have also come out on top in six of the eight sectors over three years and in all sectors over the past ten years.

The research, commissioned by F&C, revealed that only unit trusts and Oeics investing in Japan and UK smaller companies have performed better than their investment trust counterparts.

There are periods in which unit trusts outperform – usually when markets are falling – but it has been proven time and again that advisers neglecting investment trusts are failing to treat their customers fairly.

That should start to change in 2013, when providers will no longer be able to pay commission to advisers for selling their products, but it may take some time for many advisers to overcome their natural antipathy towards investment trusts.