How are rates set when there is no contract?

Sam_W_5

Evening all,
We recently moved into a new house, and within a few days had switched to a new gas and electric supplier. I supplied Scottish Power, the existing supplier, with the meter readings from when we moved in and they sent out a bill for the time between our arrival in the property and when our accounts switched to the new supplier.
My problem is that the rates they have put us on during this period seem very high. Gas is charged at 3.798p/kWh with a 16.8p per day standing charge, electricity is 10.836p/kWh with a 17.53p per day standing charge. I have contacted Scottish Power questioning how these rates are set, but simply got an answer saying it was their standard charge.
Can anybody help me answer these 2 questions:
1) Are these charges high? I'm finding it very difficult to get a straight comparison
2) Are the charges regulated by Ofgem? As this is a non-competitive market, you have no choice but to pay the existing supplier, my feeling is that there ought to be a standard rate set across all companies.

Any thoughts/comments very welcome
Thanks
Sam

KimYeovil

Not particularly. Standing charge is quite low (£5 each per month compared to up to £14 on some tariffs.) Unit rates reasonable enough (for a standard tariff.)

PNPSUKNET

no matter what energy provider you move into they place you on a basic tariff, just ask for a direct debit or online one

Cardew

Sam_W wrote: »

1) Are these charges high? I'm finding it very difficult to get a straight comparison
2) Are the charges regulated by Ofgem? As this is a non-competitive market, you have no choice but to pay the existing supplier, my feeling is that there ought to be a standard rate set across all companies.

Any thoughts/comments very welcome
Thanks
Sam

When you move into a property and use any of the gas/electricity you have entered a legally binding deemed contract and the tariff is invariably their standard tariff.

It isn't a non-competitive market? However the cheaper tariffs always have a penalty clause for leaving early. If you wanted you could immediately switch to one of the cheaper tariffs with the company supplying your property - if you do it quickly enough they will apply that tariff from the date you occupy.

Had you moved in and found yourself on a cheap tariff but with a penalty for leaving early, you might have had a bigger complaint!!

It is also not true that you have no choice but pay the existing supplier. You can arrange for the supplier of your choice to take over before you move in; albeit that you might have to wait several weeks before you occupy.

In the real world the difference between a standard tariff and a cheaper internet tariff from a new company is not a great deal of money in the few weeks it takes for a switch to take place. Surely a small price to pay for having gas and electricty connected when you move in - and not disconnected as it was in yesteryear.

undaunted

I hate the so called "deemed contract", do not agree that the only alternative would be disconnection and, more importantly, would suggest that you can not in fact legally just simply choose to "deem" a contract upon anyone regardless of whether it is or it isn't.

There is however a loosely worded reference to such a process (though specifically acknowledging that the customer has not contracted and there is / was no express contract or defined terms entered into) which Ofgem and suppliers rely upon.

As far as I have been able to ascertain so far it has never been tested in court by anyone but I would be most interested in the details if any member can demonstrate otherwise.

An Ofgem take on the process can be found here
http://www.ofgem.gov.uk/Markets/RetMkts/Compl/SLR/SteerngGrp/Documents1/14319-Deemed%20Contracts.pdf

In the example / circumstances you cite I suspect that you are likely to find Ofgem (who like "deemed contracts & wouldn't know the meaning of "regulate" in my opinion) & therefore the Energy Ombudsman (who claim they can't criticise companies for doing something Ofgem allows) unreceptive & whether you now feel the charges high or not you are therefore almost certainly going to have to pay them before you are able to transfer I'm afraid (unless someone does come up with a successful / proven challenge or you happen to be a business customer rather than domestic)

Cardew

undaunted wrote: »

I hate the so called "deemed contract", do not agree that the only alternative would be disconnection and, more importantly, would suggest that you can not in fact legally just simply choose to "deem" a contract upon anyone regardless of whether it is or it isn't.

There is however a loosely worded reference to such a process (though specifically acknowledging that the customer has not contracted and there is / was no express contract or defined terms entered into) which Ofgem and suppliers rely upon.

As far as I have been able to ascertain so far it has never been tested in court by anyone but I would be most interested in the details if any member can demonstrate otherwise.

An Ofgem take on the process can be found here
http://www.ofgem.gov.uk/Markets/RetMkts/Compl/SLR/SteerngGrp/Documents1/14319-Deemed%20Contracts.pdf

In the example / circumstances you cite I suspect that you are likely to find Ofgem (who like "deemed contracts & wouldn't know the meaning of "regulate" in my opinion) & therefore the Energy Ombudsman (who claim they can't criticise companies for doing something Ofgem allows) unreceptive & whether you now feel the charges high or not you are therefore almost certainly going to have to pay them before you are able to transfer I'm afraid (unless someone does come up with a successful / proven challenge or you happen to be a business customer rather than domestic)

It matters not if you like 'deemed contracts' or not - they are enshrined in Law(the Gas and Electricity Acts of Parliament) and are nothing to do with Ofgem.

If you want Chapter and Verse:

For electricity, it is set out in an amendment to Schedule 6 of the Electricity Act 1989, contained in Schedule 4 paragraph 3 of the Utilities Act 2000. For gas it is set out in the Gas Act 1995, Schedule 2 (Schedule 2B to the 1986 Act), paragaph 8.

Why do you dismiss the very clear reference to those Acts of Parliament as the 'ofgem take on the process' ?

I am no fan of the privatisation of gas and electricty. However the provision of 'deemed contracts' was included for the benefit of consumers and was one of the few good things about the act.

In earlier times the gas and electricity could be cut off when an account holder left the property - the fuses were removed!

The new occupant would have to sign a contract in advance, sometimes with a deposit, and make an appointment for someone to come and re-connect the electricity/gas.

Also, as said above, you don't have to accept a deemed contract; you have a choice. However you must make arrangements for a tariff of your choice before you occupy the property(or at least use any gas/electricty)

Perhaps you can suggest a better alternative?

undaunted

Cardew wrote: »

It matters not if you like 'deemed contracts' or not - they are enshrined in Law(the Gas and Electricity Acts of Parliament) and are nothing to do with Ofgem.

If you want Chapter and Verse:



Why do you dismiss the very clear reference to those Acts of Parliament as the 'ofgem take on the process' ?

I am no fan of the privatisation of gas and electricty. However the provision of 'deemed contracts' was included for the benefit of consumers and was one of the few good things about the act.

In earlier times the gas and electricity could be cut off when an account holder left the property - the fuses were removed!

The new occupant would have to sign a contract in advance, sometimes with a deposit, and make an appointment for someone to come and re-connect the electricity/gas.

Also, as said above, you don't have to accept a deemed contract; you have a choice. However you must make arrangements for a tariff of your choice before you occupy the property(or at least use any gas/electricty)

Perhaps you can suggest a better alternative?

Whilst it is true that the deemed contract pre dates Ofgem Ofgem does supposedly act as the Regulator.

I "dismiss" it as you call it because

A) The link is only to "Ofgems take" on the process. It is not directly to any act of Parliament referred to there.

There is a range of other UK legislative acts and EU Directives which would appear to me (and others) to potentially completely contradict the concept of deeming a "contract" upon anyone.

In terms of an alternative you may or may not recall that you have asked me the same basic question previously and you then had my answer. We will therefore probably just have to simply agree to disagree for the time being (until at some stage the issue is tested in Court perhaps?)

Basically however, I

Disagree that deemed contracts do benefit the customer

Disagree that the onus should be solely upon the customer - he doesn't actually need a contract to buy anything after all does he?

Believe a clearly defined and specific contract between two identified & consenting parties is essential if a contract is to exist (at present many suppliers are quite happy to use a "deemed contract" for years even though this is apparently not what Ofgem as the Regulator "expects" to happen.

Believe that there should be a binding obligation upon the supplier to ensure that a contract be properly formed, either immediately or at worst within a short period of supply commencing, (such as say within a month or a quarter at most) unless they wish to "supply as they go" without any contract exisiting.

KimYeovil

Other than some silly pedantic legal points-scoring what is your practical objection?

You do understand the prohibitive expense of the consequence of not having deemed tariffs? You do understand that if they did not exist the standard tariffs would be even more expensive, not cheaper?

Cardew

undaunted wrote: »

In terms of an alternative you may or may not recall that you have asked me the same basic question previously and you then had my answer. ----

You gave no answer! You gave no solution.

The deemed contract is not imposed on anyone! If you don't want to be on a legally binding deemed contract - then don't use any gas and electricity from that company untill you have made alternative arrangements.

These days people move into a property with the gas and electricity all connected and ready to go - Isn't that better than any other alternative?

If you enter a deemed contract, you can leave it at any time you wish.

Like your previous contribution on this subject you have given no substanstive objections to the system or no alternative suggestions for a better system.

Sam_W_5

Thanks for the responses, they make interesting reading. I do not in general have a problem with the deemed contract, what does concern me is that the price you will pay during this time will vary according to the energy company that the previous occupier used. Given that it will often be impractical to get suppliers changed before moving in (we only found the house 2 weeks before we started the tenancy, the changeover took 6 weeks) it becomes very difficult to choose the cheapest supplier.
Given that you are at the mercy of the previous owners energy supplier, it seems to me that this is a case where the cost of gas and electricity should be regulated and standardised across all suppliers. I wouldn't expect the tariff to be especially cheap as direct debit etc. discounts can't be offered, but I would expect it to be reasonable.
I fully appreciate that the potential saving for myself would be very small, and in many ways this is more an issue of regulation and how it should be used to protect consumers as a group, rather than a practical cost saving measure for individual customers.

KimYeovil

You are also at the mercy of the previous occupants' choice of bathroom suite, wallpaper, flooring, fitted kitchen ...

Any of those cost a darn bit more to rectify than the difference in prices between tariffs over a month or two!