MSE News: Escape energy lock-ins as prices soar

needingaccountability

Thanks for the info, read it yesterday and emailed BG straight away. Just got this reply ....

Dear Mrs xxxxx


Thank you for your enquiry sent yesterday.

I am sorry you had to contact us about the £30 cancellation fee applied to your electricity account; I have logged a complaint to record your dissatisfaction.

The £30 fee was applied in error and I have subsequently removed it under the Ofgem guidelines, this will now show on your final bill as a reversal.

Please accept my apologies and if you ever do wish to come back to British Gas we will be more than happy to bring your electricity supply back.

Please contact us should you need any help in the future and thank you for contacting British Gas.

Kind regards

Consumerist

I've just been having a look at the npower - Sign Online 23 tariff :-

A cancellation fee of £20 per fuel may apply if you change tariff or supplier before 6th November 2012.

and then, further down the page :-

***Your annual discount: If you pay by monthly Direct Debit continuously for 12 months we’ll give you a discount off your bill (£100 if you buy both electricity and gas, £50 if you buy just gas or £40 if you buy just electricity). Your discount will be credited to your account on or before the last day of the 12th month after becoming eligible and then on or before the same last day of each year you continue to pay this way. . .

So, not only do you pay termination fees if you switch within a year but you also lose all your discounts (another form of termination fee). This form of discount payment seems to apply to all npower tariffs.

I don't think npower is alone in applying discounts only after a full year so it seems the termination fees are still being applied by calling them "discounts". Shades of O'Leary here, I think.

John_Pierpoint

Consumerist wrote: »

I've just been having a look at the npower - Sign Online 23 tariff :-
and then, further down the page :-
So, not only do you pay termination fees if you switch within a year but you also lose all your discounts (another form of termination fee). This form of discount payment seems to apply to all npower tariffs.

I don't think npower is alone in applying discounts only after a full year so it seems the termination fees are still being applied by calling them "discounts". Shades of O'Leary here, I think.

The N-Power system is really a deferred rebate.

I used to work for a multinational company that used the technique to make customers think twice about taking their business to a competitor BUT in the USA the practice was illegal being in restraint of trade.

http://dictionary.babylon.com/deferred_rebate/

Interestingly some American legislation made the supplier pay up all outstanding deferred rebates as soon as that supplier wanted to increase prices - that being a disincentive on the supplier trying to increase prices.

Methinks we need something like that over here.

Consumerist

John_Pierpoint wrote: »

The N-Power system is really a deferred rebate.
I used to work for a multinational company that used the technique to make customers think twice about taking their business to a competitor BUT in the USA the practice was illegal being in restraint of trade. . .
Methinks we need something like that over here.

Quite agree. The question is how?

I'm inclined to raise this with Consumer Focus and/or Ofgem to see what their responses might be. In any event, by the time Ofgem have consulted all and sundry, it's likely to be some time before anything changes, by which time the energy companies will have found a new scam to impose on us. Their dubious practices are akin to those in the financial sector and, given the amount of our money the energy companies hoard and pay no interest on, they probably regard themselves as banks, anyway.

backfoot

Npower have altered the terms of this deferred discount for new customers. They now pay it as you go along but if you leave they will reclaim the discount.

The reason they changed was to get the discount included in the comparison tables.Under the Confidence Code that £100 was previously being excluded because it was conditional on staying for more than a year.

It is a cynical move by npower.

The problem now for them now is that the discount is now part of their main terms. As a result, following a price increase (a unilateral variation under LC23),they are obliged to supply at pre increase prices and associated discounts.

So they have shot themselves in the foot.

I have already alerted Consumer Focus to the ruse with a view to them policing either the Confidence Code issue or ensuring that accrued discounts are not reclaimed.

It wouldn't hurt to make your own representations.

Consumerist

backfoot wrote: »

It wouldn't hurt to make your own representations.

I was hoping you'd make a contribution on this one, backfoot.

I guess that the more of us who complain to Consumer Focus, the stronger is their case to raise a complaint.

Is it worth raising with Ofgem as well?

Consumerist

backfoot wrote: »

Npower have altered the terms of this deferred discount for new customers. They now pay it as you go along but if you leave they will reclaim the discount.

My understanding of their Ts&Cs is that they adjust monthly payments to anticipate the payment of the discount but do not integrate the discount into the unit rates or into the monthly bill.

Your monthly payment amount: In your first year with npower any product or payment discounts you’re entitled to will also be built into your monthly payment amount. Please remember, if you decide to leave us or stop meeting the conditions of the discount, e.g. you stop paying by Direct Debit, before the end of the first 12 months, you won’t receive your discount and you may find your monthly payments haven’t covered the energy you’ve used.

In my book, it's still a termination charge if they do not pay the discounts.

backfoot

At this stage, I felt that Consumer Focus was the best place because they have responsibility for the Confidence Code. I have contacted the Confidence Code Manager on previous issues and she is responsive to such issues.

I combined with it with an alert to look out for any procedural errors in reclaiming /denying the accrued DD discounts following a price increase,which of course NPower have just announced.

Given NPower's previous record on the gas sculpting issue, you can imagine they will make life difficult for their customers. (I am not one and probably never will be).It will need someone to test the waters.

I would leave Ofgem for the moment and see what CF have to say,but of course that is only my view, rather than anything prescriptive.

jalexa

backfoot wrote: »

So they have shot themselves in the foot.

Edit: this is in reply to your previous post (as would be clear from hybrid or threaded mode).

In response to your excellent post (and also Consumerist's posts), that is a very interesting point.

The "infamous" 24.3 "Termination Fee" clause, capitalises "Termination Fee". Whether the rules, to use Ofgem terminology "captures" the implicit cost to the consumer of leaving early (because the monthly payments already factor in the discount), as a "Terminition Fee", is IMO unclear.

I couldn't help noting Ofgem's "always the intention...." in their "termination fee" clarification. Talk about rewriting history.

I have warned against "deferred discount" tariffs for over a year. Though at times not aware of the most recent Consumer Focus confidence code revision (regarding headline cost calculation in the presence of deferred discount), the warning that the "discount" might be forfeited due to "early termination" remains valid until there is further Ofgem guidance or regulation.

For completeness, while NPower factors in the discount into the monthly payments, Atlantic excludes the discount from the monthly payments, thus making a nice 8% earner on margins (and possibly keeping the discount).

Commonly, tariffs from Npower and Atlantic feature "deferred discount". Beware "deferred discount" tariffs if you do not understand the circumstances the "discount" might be forfeited.

backfoot

Consumerist wrote: »

My understanding of their Ts&Cs is that they adjust monthly payments to anticipate the payment of the discount but do not integrate the discount into the unit rates or into the monthly bill.In my book, it's still a termination charge if they do not pay the discounts.

I think you are right,which makes it even more of a ruse to get round the Comparison Site exclusion. In fact, I am not sure it is at all valid.

I agree it has the same effect as a termination fee but I don't think it will be treated as one under SLC24.I think that the better prospect not to lose the accrued benefit of the discount lies with SLC23. They should pay the accrued discount up to the point that a switch is completed on the basis that it was a principal term of the contract.