Bulk LPG - Cheapest suppliers / supply route?

HateLPG

John_Day wrote: »

BBC - ARE YOU LISTENING ?

I fear not - I think there is a perception that LPG is a "Minority" fuel, used only by the landed gentry to heat their crumbling piles and little appreciation of the impact of the unregulated LPG market on ordinary people.

I have in the past tried drawing this to the attention of BBCs "Watchdog", "You and Yours", "Moneybox" and also to the "Consumers Association" (publishers of Which? magazine) and even to Consumer Focus. On every occassion, I received at best a frigid response, and typically no response at all :mad:

Maybe that was because I was raising this in isolation - perhaps if there was a coordinated effort by members of this forum to draw the attention fo Watchdog to the issue, it might have a better result. That said, while such media exposure will have useful short-term benefits, I have come to the conclusion that although the market is far better than it was prior to the CC ruling, even MORE fundamental changes are required to make it operate PROPERLY.

LittleVermin

John_Day wrote: »

Visited this site for the first time, prompted by yet another letter today from Calor (dated 23 November 2010) increasing the price of my bulk LPG by 3.5p/pl , from 48.9p/pl to 52.4p/pl.

By way of background,I have been a bulk tank LPG customer of Calor for over 23 years, and live in North Devon, served by Calor's Ivybridge Plymouth Depot. Our home consumption is c.3000 litres per annum.

...............................!

As for me, I suppose I will now have to hawk my custom around the other LPG suppliers, and horse trade for the best deal I can get - just what I need in retirement !
.................

Welcome to the Forum.

If you are out of contract - and as you live in the South West - you might like to contact Mole Valley Farmers whose members have special prices with Calor and Flogas. Even if you are in contract it might be worth asking Mole Valley if there's any mileage in this (details in an earlier post of mine). [Another poster wrote that their Flogas price dropped from 45 to 30ppl when they joined Mole Valley - for £10 p.a.]

Lots of stories about Calor on this thread - and on LPG / LPG Prices thread: maybe use the Search tool to find them.

Finally, would you write to your MP, please, asking for LPG to be included in the proposed regs about displaying energy supplier's cheapest deal on statements? There are a couple of letters in earlier posts which may be of use for reference - though it seems you have plenty of unwanted experience to relate. Exposure in the media could be a one-day wonder, as HateLPG has just written, whereas legally binding regs are a different matter all together.

meagan

My problem is I only signed my contract in Sept and it stated fixed for 6mths and now this letter saying its going up.I would like any advise on how make them honour this contract.It seems to me these contracts are worthless,what would happen if we the customers decided to ignore a signed contract,we would end up in court.is there any official body I could contact that would make calor take notice

HateLPG

I've been having a play about with the figures that I posted a couple of weeks back, and I have noticed a few interesting trends leading to an unexpected conclusion.

(see http://picasaweb.google.com/lh/photo/Gx_2RzMFo30uSNSenGNhF6hR79FERUXpERU24_mM93k?feat=directlink for the graph)

These, are only based on the data posted in this thread, and this is only MY interpretation of the figures, but I think the pattern is actually quite clear if you look carefully at the data and I think it is worth sharing. I would be interested to hear any other comments or conclusions from others.

• Between August 2008 and August 2010, Quotes for NEW business (i.e. on changing supplier) were by and large 30-40ppl; Since August 2010, quotes for new business seem to be in the 35-45ppl band. As I have posted before, I don't believe that ANY company will offer a "loss leader" and as such, it is reasonable to suppose that the quotes being offered fairly reflect the true market price for LPG.

• Prior to April 2009, contract renewal prices appear to have been offered in line with the ongoing contract price in force at the time. Since April 2009, contract renewal offers by and large seem to be more in line with the prices being quoted for New Business. This is to be expected and *is* a good thing.

• Prior to April 2009, the differential between ongoing prices for those in contract and prices quoted for new business appears to have been somewhere around 5-7.5ppl. SINCE April 2009, the figures available suggest that this differential has doubled to 10-15ppl. That is to say, prior to the Competition Commission Ruling, if you changed supplier at the end of your contract, you could reasonably expect to save between 5 and 7.5ppl - a substantial saving, but almost certainly NOT enough to justify the extortionate cost of uplift charged by your outgoing supplier! SINCE the ruling, it would appear that you can reasonably expect to save something between 10ppl and 15ppl by switching. On the face of it, this might seem a "good thing"; but it is NOT.

I would conclude from this data that prior to the CC ruling, the consumer was locked into (typically) a 3 or 5 year contract, over which period the supplier was happy to quietly make his "pound of flesh", knowing also that at the end of the period the customer was unlikely to change supplier anyway UNLESS the price had so high as to justify the outrageous uplift charges that he would be liable for. I believe this actually had the effect of keeping prices broadly "realistic" and similar across all suppliers (we all know that some suppliers were consistently more expensive than others at that time, and still are, but that differential could only in very rare circumstances offset the uplift charge).

Now, however, the supplier has only TWO years to make his pound of flesh and he knows that at the end of that period, the consumer is able to move away freely and with no penalty if he can get a better deal elsewhere. While this might appear a good thing and serve to keep prices DOWN and competitive, in practice this is simply not happening. Why? Because the shareholders and holding companies will not tolerate the collapse of their profit margins that would occur if all supply was competitive. Also, since there are only four main suppliers, they ALL know that we are on a price merry-go-round and for every customer they lose, they stand to pick up another customer from an alternative supplier. As such, there is actually no longer ANY incentive or reason for the supplier to limit his price increase over the life of the contract. Instead, the pressure is on the supplier to maximise his profit over a two-year period, after which he will be happy to let the customer go, knowing that he will in turn pick up an equally disgruntled customer from another supplier.

What the solution is, I am not sure - I could think of a number of ways that could help improve the market, but the one thing I *am* certain of is that the lack of regulation in this market and the unintended consequences of the CC ruling are costing us poor LPG users a fortune.

Just my thoughts, but I think they are worth sharing!

HateLPG

meagan wrote: »

Is there any official body I could contact that would make calor take notice

Meagan,

See my PM for more info, but the short answer is:

There is no official body worth it's salt looking after the interests of LPG users!

But before you start worrying about "official bodies", have you even spoken to/contacted Calor about this yet? You may be miffed, but until they have actually categorically and unequivocally *refused* to honour their contract, it's a bit premature to be contacting official bodies anyway - as I explained in my PM, they won't be interested until you can demonstrate that you have taken reasonable steps to resolve this matter and can demonstrate that was NOT just a mistake or oversight on their part.

LittleVermin

meagan wrote: »

My problem is I only signed my contract in Sept and it stated fixed for 6mths and now this letter saying its going up.I would like any advise on how make them honour this contract.It seems to me these contracts are worthless,what would happen if we the customers decided to ignore a signed contract,we would end up in court.is there any official body I could contact that would make calor take notice

Hi Meagan,

Sorry about this. I've been looking for an old post where someone quoted a bit of legalese - "fair bargain" I think it was - and got ?Calor to back down. But frankie posted a Calor tale beginning here
http://forums.moneysavingexpert.com/showpost.php?p=33181167&postcount=108 in the LPG/LPG Prices thread which is relevant. I guess your 6 month price guarantee is in your contract? And also a maximum rate of price rise?

I guess Trading Standards is a first port of call - if pointing out your contract to Calor doesn't work.

Good luck!

And please write to your MP about including LPG suppliers in the proposed regs where energy suppliers have to state their cheapest deal on statements (see my letter earlier in this thread).


Oops, just seen HateLPG has answered you.

John_Day

Many thanks for the advice.

I will certainly pen a letter to my MP, who is Defence Minister Nick Harvey. I only hope that his new Ministerial portfolio does not take precedence over his grass roots constituency work.

As for Mole Valley Farmers. Yes, we do have a few branches in North Devon. Whilst I am not a member, maybe the saving would make this cost effective. Unfortunately, I have just filled the tank as Calor refuse to make part deliveries. I am assuming that all Calor Depots operate this condition, whereby they will only make full tank deliveries ? Or is this just a ruse by the Ivybridge Depot to earn their Xmas bonuses !

The fact is I do not need all this hassle, and I am incensed at being charged 52.4p p/pl on the very day that BBC News advises that Energy Suppliers have 'never had it so good'. So that's where Lord Young has his millions invested !

PetersRock

With lots of excess money being trawled in by Bulk LPG suppliers, why is no-one doing a price comparison page?

Living in the sticks, we canno get either dual fuel prices or mains gas supply.

We are being stuffed, when it comes to price, and need to find a way out, which does not leave us naked in a cold winter.

HateLPG

PetersRock wrote: »

why is no-one doing a price comparison page?

Because, sadly, there is nothing realistic to compare - the way the market operates at present means the price you pay is the best price you can negotiate. And the suplpiers will CLAIM that this is entirely dependent on your usage and location. I have posted on this before ( see http://forums.moneysavingexpert.com/showpost.php?p=38323874&postcount=302)

and I have also posted a distillation of all price quoted on this board (http://forums.moneysavingexpert.com/showthread.php?p=38448236&highlight=#post38448236, http://forums.moneysavingexpert.com/showthread.php?p=38448212&highlight=#post38448212 and http://forums.moneysavingexpert.com/showthread.php?p=38448182&highlight=#post38448182)

Hopefully those will at least get you pointed in the right direction

HateLPG

For information, copy of a letter I have sent to my Constituency MP and copied to Charles Hendry MP (Minister of State for Energy) and Vincent Cable MP (Secretary of State, Business, Innovation and Skills). Please don't copy verbatim (I think that will weaken any argument and make any letters look like a mass mailshot), but feel free to take any of the ideas, facts etc. and reuse/rewrite them as you feel appropriate.


--


I am writing to you with regard to my serious concerns over the operation of the Bulk Domestic Liquefied Petroleum Gas (LPG) market.

As you may be aware, some 4.3 million households across the UK are not currently connected to the Gas network [1], with the highest proportion of these being in Scotland, Wales and rural England. Consequently these households are dependent upon other sources of energy for domestic heating. Of these Off-Mains households, approximately 1.5 million are dependent on heating oil [2] and 150,000 are dependent on LPG [3]. I live in a fairly typical house for the location and currently pay in excess of £2000 per year for LPG for heating and hot water.

While there is much regulatory and media attention focussed on Mains Gas and Electricity, LPG is the poor relation, garnering next to no media coverage and not being subject to any kind of regulation. This situation is made worse by the fact that there are now only four companies of any significance serving the market: Calor, Flogas, Shell and BP, and these companies do not supply universally. This means that the majority of consumers have a realistic choice of just two or three alternative suppliers.

In 2004, the Competition Commission recognised that the LPG market was failing to operate correctly and undertook a thorough investigation. This culminated in an order that eventually came into force on 13th April 2009, nearly five years later, supposedly opening up the market by removing restrictions on tank transfer and limiting contracts to a maximum of two years. While LPG users were optimistic that this was a significant step forward and would open up the market to better competition, it is my belief that this ruling has in fact had a negative effect on the market and has caused the real price of LPG to increase sharply for the majority of consumers.

I have over the past few months, collated a set of data showing the prices being quoted to and paid by users since the end of 2007 (see attached graph) and have noticed the following trends:

1. From early 2008 until August 2010, quotes offered by suppliers trying to gain new business (i.e. where a customer was looking to change supplier) were generally in the 30-40 pence per litre band. It is significant to note that these quoted prices did not at any time fall, despite the widely publicised drop in wholesale gas prices; From August 2010 until the time of writing, the majority of quotes for new business that I have seen range from 35-45 pence per litre. As I believe it to be unlikely that any company will offer a significant price reduction for a small-scale domestic user on a two year contract, I believe that these prices are a broadly fair reflection of the true market price for domestic LPG.
2. Prior to April 2009, contract renewal prices appear to have been offered in line with the ongoing contract price being paid by the customer at that time. Since April 2009, contract renewal offers by and large seem to be more in line with the prices being quoted for New Business. This is only to be expected, since following the Competition Commission ruling, the outgoing company was no longer able to penalise the departing customer with an uplift charge of several hundred pounds to remove their tank, thus the only option they had to retain business was to offer a competitive initial price for the next contract period;
3. Prior to April 2009, the differential between prices being charged to customers already under contract (taking into account any price rises since the start of their contract) appears to have been somewhere around 5-7.5pence per litre. Since April 2009, the figures available suggest that this differential has doubled to 10-15 pence per litre. That is to say, prior to the Competition Commission Ruling, if you changed supplier at the end of your contract, you could typically expect to be paying something between 5 and 7.5 pence per litre over the market base rate - a substantial saving, but almost certainly NOT enough to justify the disruption and the extortionate cost of tank uplift charged by your outgoing supplier. Since the ruling, however, it would appear that consumers could typically expect to be paying something between 10 pence per litre and 15 pence per litre above the market base rate by the time of contract expiry.

I would conclude from this data that prior to the Competition Commission ruling, the consumer was locked into (typically) a 3 or 5 year contract, over which period the supplier was happy to quietly make his profit, knowing also that at the end of the period the customer was unlikely to change supplier anyway UNLESS the price had so high as to justify the outrageous uplift charges that he would be liable for. I believe this actually had the effect of keeping prices broadly "realistic" and similar across all suppliers, accepting that some suppliers are consistently more expensive than others.

Now, however, the supplier has only TWO years to make profit and he knows that at the end of that period, the consumer is able to move away freely and with no penalty if he can get a better deal elsewhere. While this might appear, in principle, to be a good thing and serve to keep prices DOWN and competitive, in practice this is simply not happening. Why? Because companies are, quite reasonably, motivated not by customer loyalty, but by profit, and a truly competitive market is not conducive to the maximisation of profit. Because the consumer is locked in to a two year minimum contract and because there are only four main suppliers, I contend that the suppliers are not motivated to keep prices down: profits will be maximised by imposing the maximum level of price rise permitted under the contract, and accepting that the customer will change supplier after two years, safe in the knowledge that as long as all companies are acting in the same way, they will be able to take on an equivalent level of business from customers leaving other suppliers for the same reasons. The net result of this situation is the true price of LPG being paid by the consumer is currently rising by something between 15% and 25% year-on-year, dependent on supplier.

The market is further distorted as there is no requirement on any company to publish any tariff details, whether a "standard" tariff or a "best" tariff, and the price that any customer will get is the best price that they can negotiate. This puts weak, inarticulate and vulnerable users at a distinct disadvantage. This was very clearly highlighted in the BBC program, "Don't Get Done, Get Dom", first broadcast 24 May 2010. To summarise, it was found that on an estate in Winkleigh, Devon, 51 properties on the same estate were being charged different prices for their LPG by the same supplier, Flogas. And the oldest resident in the village, 80 year old Veronica Williams, was paying the highest price of all simply because she was unaware that the contract was "negotiable".

One final point of note is that all LPG customers are also subject to a mandatory annual "maintenance and inspection" charge under the contract, and in the case of Shell and Calor, this charge has in the past few months been increased by 65% from £60 per year to £100 per year.

In summary, as was previously recognised and acknowledged by the Competition Commission, the LPG market was not operating competitively and the consumer was being severely disadvantaged as a result. An order came into force on 13th April 2009, designed to increase competition, but I suggest that this has had the unintended and contrary effect of generally increasing the price being paid by domestic users for bulk LPG.

I therefore urge that you give your fullest consideration to the following:

1. That the market is referred back to the Competition Commission and subjected to a further rigorous review in the light of the changes that were previously imposed and that a far tighter time scale is imposed for reaching any conclusion and bringing in to force any subsequent order;
2. At present, Consumer Focus is supposed to represent the interests of the consumer in this area. They are, however purely "advisory" and have no regulatory powers. On the occasions I have tried to contact them in respect of LPG pricing practices (not specifics), they have refused even to discuss the matter with me, instead insisting that I speak to Consumer Direct. As such, I consider it imperative that the market is brought fully into line with Mains Gas and Electricity supply and placed under the auspices of Ofgem, who can monitor the market, prevent anti-competitive and unfair practices, hold the suppliers fully to account for their actions and can impose sanctions in the event of unacceptable behaviour on the part of the suppliers.

I would be most grateful if you could give the above matters your fullest attention as I believe they are issues of prime concern to a great number of your constituents in this predominantly rural constituency at a time when fuel poverty is becoming an increasingly prevalent problem. Given the matter under discussion, I have also sent copies of this letter to Charles Hendry, Minister of State for Energy and Climate Change, and Vincent Cable, Secretary of State, Business, Innovation and Skills, as I feel it is vitally important that they too are made fully aware of these issues.


[1] Source: Consumer Focus - http://www.consumerfocus.org.uk/campaigns/heating-fuels
[2] More than a third of households in Scotland and 19 per cent in Wales are not on the gas network
[3] Sources: Federation of Petroleum Suppliers and UKLPG respectively