Diary of a Switch
Catherine Mitchell, IGov Team, 8th January, 2014
Stimulated by Ed Miliband’s 2013 Labour Conference ‘reset’ speech, I decided to ‘switch’; to examine my energy bills with more care than I normally do; and to write a blog about it. Switch is the term used to describe an energy customer moving from one energy supplier (in my case from buying gas from British Gas (BG) to Good Energy (GE), which I already buy my electricity from). I describe the switch below but this blog has become about (1) confirming the incredibly unreadable and unhelpful bills sent to customers by BG; (2) how there is no explanation of what a fixed charge is made up of or what the relationship is between a fixed charge and the bill constituents (ie gas costs, distribution costs etc); (3) how the retail market review (RMR) requirements on suppliers seems unlikely to be successful in making customers feel more at ease with their bills; (4) how important it is to read your meter and let your supplier know what you have used; and (5) how closing an account is irritatingly difficult.
But what has really come home to me as a result of looking closely at my bills for the first time in a long while, is how expensive gas is. I do not think of myself as someone who uses gas. I have a very energy efficient house, my cooking is electric, I have a solar water heater for water heating and only turn the water heater on during November to February and then very rarely and for very short periods of time. I hardly ever use central heating – having a wood burning stove, more for cosiness than necessity. Yet I still paid £190 for my October 2012-October 2013 gas. Gas seems to go nowhere at all in terms of warming water and warming the house
Housing, fuel and power is now the highest spending category of family income. People who do not live in a very energy efficient house like I do are faced with the choice of either spending vast amounts of money on gas to stay warm or being cold if they cannot afford to. This sums up the political issues around energy at the moment. Energy efficiency of our housing stock and provision of solar water heaters for our water heating has to be at the top of our energy policy agenda – it meets environmental, security and affordability issues. All of our households should be living in energy efficient housing like mine. It may not be in the private interest of companies whose business model is based on selling, but it is a fundamental social good.
I examined my 26th October 2013 Autumn Gas Update (ie quarterly gas bill) which was taken from an actual gas meter reading of 25 October 2013. This showed I had used one unit of gas in the last quarter which equated to £2.44 worth of gas. My friends and colleagues reaction to this was: how can it be so low? Surely you use more? Whereas my reaction was ‘I didn’t think I used any gas in the last 3 months. How come I used a unit? In fact, my astonishment got worse as I looked through my bills to realise that I have used between 50 and 89 units of gas a year for the last 3 years – the equivalent of 1550-2700 kWhs / a year. Given my electricity bill is about 800 kWhs a year, this gas usage seems enormous to me even though I know, compared to most people, a bill of £130-190 a year is low.
As it turns out, BG had billed me for 1 unit only because it had actual meter readings for October 2012 and for October 2013. They had over- estimated usage and bills in February and May 2013. In order to equalise my annual bills with my annual usage the October 2013 bill had to be 1 unit. This did not make any difference to me because I was paying a £15 monthly direct debit over the year and this ended up pretty bang on my annual bill of £190, which works out at £16 a month. BG had raised my direct debit from £5.60 earlier on in 2013 and the February and May bills were about 40% above my 2011-2012 bills (despite reasonably similar prices ie 8.796p/kWh for 2680 kWhs and 4.076p thereafter in 2011-12 changing to 8.115p and 4.573 p/kWh in 2012-13) and still the 2012-13 bill came in about right – I find that interesting. What this shows, if you want to keep on top of your consumption, is the importance of owning your own trusty meter key (I now have a particularly fine one from B&Q), reading the meter, and making sure your supplier knows what your usage has been.
However, in order to write the previous couple of paragraphs I have had to spend about a day trying to get to grip with my bills. Quarterly bills give information about usage (often estimated) and price for that previous quarter and the equivalent a year before. Annual bills give annual usage. The latter provide a generalised breakdown of a bill is (ie 51% wholesale gas costs, 23% delivery to your home, 4% on environmental and social costs, 7% on corporation tax and VAT, 8% on operating costs and 7% profit) but these percentages are not specific to any bill – it is based on an average annual consumption (14,666 kWh of gas) and average regional prices. The implication of these breakdown figures for my next year’s bill was that I should pay roughly double the £2.44 gas use ie around £5 – clearly not the case and therefore simply confusing.
Nowhere in any British Gas bill was there a mention of a standing or fixed charge, which is one of the requirements of the Retail Market Review (RMR) domestic Standards of Conduct which came into effect on 26 August 2013 under the catchy title of Simpler, Clearer, Fairer. I already buy my electricity from GE and GE’s electricity bills clearly set out the fixed regional daily charge and the regional price of electricity per kWh. I expected to have a standing charge with BG but it seems I don’t. This raises the question of what a fixed charge on a bill is expected to cover and what the relationship is between a fixed charge and the generalised breakdown of a bill provided in the BG Annual Statement). Neither the RMR document above nor Ofgem’s helpfully titled ‘Understanding Energy Bills’ provides an explanation for this. British Gas (and all energy suppliers) should be clarifying on its bills (1) if there is a daily fixed charge, and if so what it covers; and (2) what the relationship is between the fixed charge and the components of the bill.
I rang GE on 12th of November and put the switch in motion. My standing charge for gas with GE was to be 22.35p a day (or about £7 a month) and my gas was to cost 4.157p/kWh (thereby swopping no standing charge + a higher unit rate of gas with BG for a standing charge and a lower unit rate with GE). I was told what the switching process would be and to expect a letter from GE in about 8 weeks which would tell me when I would start receiving gas from GE rather than BG. The next day I had a contract from GE saying I would be paying £15 a month – the same as I did with British Gas. On 17 December, I received a letter from GE saying that my first payment would be drawn on 1 Jan 2014, provided I gave them an up to date gas reading around that date. On 2nd January 2014, I rang GE to give them my gas reading and that was more or less it. Very straight forward.
This was not the case with trying to close my account with British Gas – still not done at the time of writing this blog. I rang BG several times but the estimated waiting time to speak to a representative was too long so I put the phone down each time. I then registered with BG so that I could go online and then found I have to cancel my direct debit with my bank and cannot close the account online – or if you can I could not find it. My new BG online account usefully told me I have a credit of £47.45 and the last £15 direct debit had entered my account on 1 January 2014, and my next instalment would go in on 1 Feb 20th. I assume I will have to contact BG to get my money back – and therefore will have to wait on the phone at some point to do that. A far preferable process would be that BG transfer any credit to GE automatically once GE has notified them of my switch, and closes my account as well.