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Gas and Electricity

1.30 pm

Mr. Mark Lazarowicz (Edinburgh, North and Leith): I am delighted to have secured this short debate on the problem of the erroneous transfer of gas and electricity customers. This is by no means the first time that the issue has been raised in the House; there have been debates and parliamentary questions, and two early-day motions have been tabled in this Session alone. The fact that I am raising the issue again is an indication of the way in which the problem has persisted and, indeed, spread.

In many ways, erroneous transfer is too polite a term for the totally unacceptable behaviour of several major power suppliers. In some cases, I am afraid, terms such as scam and fraud come to mind. Erroneous transfer refers to the problem of customers being transferred against their will from one power company to another. They then find themselves entrapped in a morass of bureaucracy, administrative chaos and Kafkaesque resistance to efforts to sort the problem out. At best—if one can put it like that—the problem arises from incompetence. At worst, however, it often arises from selling techniques that vary from heavy-handed to fraudulent. I want to describe in a little detail some of the ways in which erroneous transfer manifests itself.

Consumers sometimes find that they have been transferred from one energy supplier to another on the basis of a signature on a contract or some other indication of consent, such as a verbal agreement. It turns out later, however, that they never signed the document in question or, if they did, they did not realise that it was meant to be a contract to transfer to another energy supplier.

I have come across several such examples in my constituency, and the consumer watchdog Energywatch details many cases in its recent report. It tells, for example, of a customer in Dundee who received a welcome letter from Virgin Energy, which was addressed to her husband. It claimed that a verbal agreement had been made, but her husband had died some years previously. A 92-year-old registered blind woman in London was tidying the balcony of her flat when she was approached by a British Gas sales agent. Her son found out later that she had been persuaded to sign a contract, even though she could not see what she was signing.

One of the worst cases that I came across was from the west midlands. A British Gas sales representative told a woman who did not have a good knowledge of English that her electricity supplier would soon go bankrupt, steal her money and leave her without power all winter. The woman, who had a disabled baby, was panicked into signing a form to change suppliers and issue the necessary direct debit instruction to the bank. As it happened, however, the bank account was in her husband's name, and when he returned home later that day, the sales reps were waiting for him, demanding that he sign the direct debit instruction. He refused, and they tried to pressure him into signing. They then physically prevented him from returning the form. He later found that the British Gas direct debit department had tried to set up a direct debit from his account.

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Often, cases of erroneous transfer reveal incompetence, rather than heavy-handed selling techniques. My constituents Sarah Shepherd and Stephen Watson actually wanted to transfer their electricity and gas supplies from ScottishPower to Scottish Gas. They signed the forms, but nothing happened. After lots of telephone calls and correspondence, Scottish Gas told them that they had not taken over as their new energy suppliers. Not surprisingly, my constituents got fed up with being given the run-around by Scottish Gas. You can imagine what happened next, Mr. Hurst. Having told their energy supplier that they no longer wanted to transfer to Scottish Gas, after several months they began to receive letters from Scottish Gas saying that the company had after all taken over their gas supply.

The problem for my constituents is that they were in the process of moving house and, to cut a long and complicated story short, they then received an incorrect bill and final demands for hundreds of pounds, which after months of correspondence and phone calls were cancelled only when I was able to intervene in the case.

David Cairns (Greenock and Inverclyde): Does my hon. Friend agree that, in this day and age, it is extraordinary that companies such as ScottishPower and Scottish Gas take so long to let people know whether they are supplying electricity or gas to a particular resident? One thing that I have found frustrating, as I am sure he has, is the length of time that it takes for the companies to verify whether they are providing a service. From his extensive experience, does he know of any other company or organisation that does not appear to know whether it is providing a service to an individual?

Mr. Lazarowicz : One would be hard pressed to find a similar example. My hon. Friend's point is illustrated by yet another example from my constituency. The case was not one of erroneous transfer but of erroneous failure to transfer. In this case, the company concerned, Spidacom Ltd., wanted to transfer its electricity supply from ScottishPower to npower. The supply was taken over by npower but the company failed to install the necessary meter for the off-peak tariff, which was the reason why the business had transferred in the first place.

It was claimed by npower that ScottishPower was making it difficult to install the off-peak meter. Mr. Hansen, the director of Spidacom, cannot say whose account is correct—npower's or ScottishPower's—but it is certainly true that, for almost nine months, all his electricity was being charged at the day rate and he was unable to get the off-peak meter that he had sought in the first place. Again, I was able to take the case up and, by a strange coincidence, his off-peak meter was installed just six days ago.

Those cases are just a few among many. I have had many more in my constituency and I know from comments from other hon. Members since the topic of this debate was announced that practically every other Member of this House has experience of similar problems. There have been various reports in the media and I particularly want to pay tribute to the excellent work of Sean Coughlan of The Guardian in exposing some of the problems with energy mis-selling.

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What worries me is that I am sure that, as MPs, we are seeing only the tip of the iceberg. Intervention by the MP normally helps to resolve the problem eventually, and I was amused that, as late as yesterday afternoon, I received a faxed letter in my House of Commons office from London Electricity relating to a case that I had taken up on behalf of one of my constituents.

However, how many people are out there who have not gone to an MP or to Energywatch but are suffering in silence? I am particularly worried about elderly people, those who may not have a good command of English or those who are not familiar with our country's bureaucratic systems. My experience, and that of other MPs, is confirmed by the consumer watchdog Energywatch. It says, in one of its recent reports:

In Scotland alone, Energywatch received 8,500 complaints in a year, of which 25 per cent. concerned erroneous transfers, many of which the watchdog says were caused by cowboy sales agents.

Although the watchdog names npower as a top offender, it says that the rogues' gallery has many members. Among those whom I have discovered to be the subject of complaint, either in my constituency or elsewhere, are Scottish Gas, Virgin Energy, London Electricity, British Gas and Swalec. That shows clearly that the problem cannot be described in terms of a few sales reps; just a few bad apples in the barrel. It seems more likely that there is a whole orchard full of such apples. The extent of the problem is so bad that it must raise the suspicion of a certain amount of connivance—or, at best, complacency—about such practices on the part of some of the energy companies.

My hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne) has drawn to my attention the case of Mr. Robert White, aged 70, who was the victim of what was indisputably fraudulent mis-selling by an npower sales representative. My hon. Friend has demanded that npower refers the case to the police, but in spite of his repeated demands, it has simply washed its hands of the matter by saying that the sales representative worked for a third-party agency, whose responsibility it is to take further action.

I know that the problem of mis-selling worries the Government and my hon. Friend the Minister in particular, and I know that the industry has adopted a voluntary code of practice, but still the examples continue to come. The voluntary code does not yet seem to be working and tougher action is certainly needed. Even Energywatch has been the subject of complaints from some of my constituents because it has not dealt with their complaints effectively. However, in fairness, I should add that other constituents have paid tribute to the effectiveness of intervention by Energywatch, and I have seen the good results of its intervention. I congratulate Energywatch on its "Stop Now!" campaign, which suggests that some action can be taken to try to deal with the problem of erroneous transfer. I endorse the suggestions that Energywatch makes.

Energywatch wants the industry regulator, Ofgem, to strengthen the conditions in operating licences, which govern the way in which energy companies should behave when selling to consumers. It wants Ofgem to use its fining powers on companies that engage in the

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sort of scandalous mis-selling that I have described. In my view, a few hefty fines and the loss of an operating licence for the worst offenders would be an excellent way to encourager les autres.

Energywatch wants the energy companies to set up a rogues register of sales agencies and individuals who fail to meet acceptable standards. It wants gas and electricity companies to pay proper compensation to consumers for the distress and inconvenience caused by the malpractices of their sales representatives, rather than merely refunding the bare minimum for financial loss, as happens all too often. It also favours the introduction of a standard format for energy supply contracts, which would help consumers to understand their contracts and compare them with those of other suppliers. Those seem like eminently sensible steps to deal with a scandal of immense proportions, and I hope that the Government will do what they can to turn them into reality.

1.42 pm

The Minister for Industry and Energy (Mr. Brian Wilson) : I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) on securing the debate and thank him for raising an issue that concerns us all. I know that that sounds like a ritualistic introduction, but this is an especially appropriate subject for an Adjournment debate, and I am grateful to have a peg on which to hang a few remarks about the issue. As my hon. Friend was good enough to recognise, there should be no doubt about my personal commitment to resolving the problem.

In my ministerial role, I am inundated with letters from parliamentary colleagues, written on behalf of constituents who have, through no fault of their own and without their prior knowledge, been transferred to another supplier. If the number of letters that I receive is sufficient to make such an impression, it is a clue to the size of the iceberg that lies below the surface, because this is a problem of enormous scale.

So that I would be up to date with the effectiveness of exhortations against such practices, I carried out some checks this morning, and the figures that I found may be of some interest to hon. Members. Yesterday alone, Energywatch logged more than 650 complaints, and last month alone, it received 13,198 complaints. Those figures are extraordinary and totally unacceptable, and I want to give clear notice that if the existing law and its enforcement is insufficient to deal with the problem, the law and its implementation will have to be strengthened.

This might be a good time to highlight some of the main offenders. Unfortunately, the latest available figures for a reasonable period cover September to November last year. There must be a lag to allow a period of reconciling when companies can challenge a complaint. The figures to January this year should be available in the next couple of weeks and I assure my hon. Friend that they will be published and that the statistics will be transparent. When I go through the names from the September to November period last year, one or two names crop up again and again. On an initial reading of the latest figures nothing much seems to have changed in the interim.

The figures show that the three gas companies with the highest number of direct selling complaints per 1,000 transfers were Beacon Gas/Seeboard, npower and

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Cambridge Gas. The three worst offenders per 1,000 transfers were npower, London Electricity/SWEB/Virgin Energy and Seeboard. Turning to transfer complaints, which include erroneous transfers, the companies with the highest number of complaints about gas per 1,000 transfers were npower, Beacon Gas/Seeboard, and Cambridge Gas. For electricity, they were npower, Yorkshire Electricity and ScottishPower/Manweb. I draw the attention of hon. Members to the fact that npower appears in all four lists, which is a matter of some public interest.

The power to do something about those malpractices already exists. Consumer law and energy regulation provide a firm basis for all those involved—be they Ofgem, trading standards departments or the police—to take appropriate action against suppliers and salesmen. It is imperative that those powers are used to good effect before we consider additional powers. Anyone who commits forgery in that context is guilty of a criminal offence. I do not see why any police officer or law enforcement agency should decline, as my hon. Friend the Member for Edinburgh, North and Leith suggested, to investigate a prima facie case of forgery.

"Erroneous transfer" is a label that is applied to a range of problems. Essentially, they have two causes. The first is that an error has been made, whether in the information about a consumer's meter or address held by a supplier, or in the transcription of that information. A consumer may then be welcomed to a new supplier, of which he may never have heard. The second is when a salesman has, perhaps on the basis of information acquired in an underhand way, transferred a consumer's supply. Again, the consumer will be welcomed to a new supplier. While the causes of the problem are different, the impact, whether simple inconvenience or actual distress, is very similar. I emphasise that I am referring to erroneous transfers and not the wider problem of high-pressure selling.

I want to go into more detail about the different aspects of erroneous transfers and the responses to them. I shall deal first with transfers that arise from erroneous data or from an administrative mistake by an employee of a supplier. There are millions of gas and electricity meters throughout the country. With that volume of information, which is being called upon extensively, we all accept that errors will occasionally occur. The important point is that when problems arise suppliers should recognise the uncertainty that can be caused to consumers. Erroneous transfer can induce concerns, albeit unfounded, of energy supplies being lost. In such circumstances, companies are obliged to correct the problem quickly and efficiently.

Last year, Ofgem, which regulates supplier performance in this and other areas, took the view that the speed and efficiency that companies were showing was insufficient. That prompted it and Energywatch, the statutory gas and electricity consumer body, to broker a new erroneous transfer customer charter. The charter is designed to enable customers transferred in error to return to their chosen supplier as quickly as possible, with the minimum of inconvenience, and without the companies concerned passing the problem between them. The process should be largely invisible to the consumer, who will be able to obtain, on request, details

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of the compensation available from those who have caused the inconvenience. I wholeheartedly endorse the charter's objective and content. Time will tell whether the industry will live up the aims of the charter, which came into effect in January. Ofgem will review performance under the charter in the coming months, with a full review taking place in the autumn.

If the industry's performance is unsatisfactory despite the erroneous transfer customer charter, Ofgem will have the option of moving beyond what is in effect a voluntary code and imposing standards of performance on suppliers. Among other things, those could carry requirements for automatic compensation payments to consumers in the event of supplier error. Ofgem could also modify supply licence conditions. The demands made by my hon. Friend the Member for Edinburgh, North and Leith will be very much in the frame if we find that the terms of the erroneous transfer customer charter—the voluntary code—are not being met.

I understand that, from 31 December 2002, in addition to the charter, the electricity distribution companies will be implementing a standard address format, which should reduce the incidence of erroneous transfers resulting from the use of inconsistent address formats. That should deal with some of the problems of erroneous transfers at source.

I turn from erroneous transfers arising from reasons that we can all understand to sales malpractice and consumers who find themselves transferred against their wishes through the tactics of sales staff. I am not talking here about high-pressure selling in a more general sense, however distasteful some of us may find that. I am referring to the individuals who ask for information and find that they have agreed a contract, quite without their knowledge and understanding—whether on a form or via the telephone—to those who are, unfortunately, unable to understand what they are being sold, and, in the worst cases, to those whose signatures have been forged. The erroneous transfer charter may help in returning consumers who have been transferred as the result of sales malpractice to their chosen supplier. However, that is not and cannot be the main method of dealing with mis-selling, because it was not designed to address that core problem. It was designed to address the problem of inadvertent and genuinely erroneous transfer, not transfer that is, not to mince words, fraudulent.

Understandably, erroneous transfers arising from mis-selling make individuals very angry. They also make those who represent them—including me—very angry. In such circumstances, there is a tendency to demand more and more legislation to deal with every potential problem that might arise. That is not necessarily the right way to address the problem, because legislation is in place. Sometimes we require emergency legislation, but the circumstances in which that is the case are somewhat removed from those involved in gas and electricity supply. I am not convinced that new legislation would be needed if the existing legislation were implemented, but, again, I leave the door open for that because the statistics that I quoted at the outset are, to me, totally unacceptable.

If what we have at present does not do the job, we must look for something else. The existing instruments are to be found in general consumer law and, I stress, in the specific powers available to Ofgem. They are

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complemented by the scope for Ofgem and Energywatch to broker arrangements with the industry and to spread best practice. Let us be in no doubt that there are a lot of measures at the disposal of Ofgem and in the wider existing law. If those measures do not do the job, however, and if in the future we still see 13,000-plus cases a month giving rise to complaint, I will not countenance that or be held responsible for it.

I am often asked why salesmen cannot be prosecuted for fraud. As I have said, they can be. Under the Forgery and Counterfeiting Act 1981, a person is guilty of forgery if—I make no apology for using legalese here—he makes a false instrument, intending it to be used to induce another to accept it as genuine and to do some act to another's prejudice.

My understanding is that, for the police or a trading standards department to bring a successful prosecution, it must be shown that the agent has gained a financial advantage at the customer's expense. In the case of energy supply, that is often not the case, because a customer transferring, albeit involuntarily, from an incumbent supplier will ordinarily be better off. In some cases, he or she will not, and that appears to offer scope for prosecution. Similarly, if a supplier has been defrauded by a salesman, it may seek a prosecution; in other words, in cases where a particular provider is the loser when the supply is taken away.

Again, I make the point that there is a range of general consumer law that can be brought to bear against rogue salesmen. In addition, there are further regulations specific to gas and electricity supply. Those take the form of conditions in supply licences and govern sales and marketing of gas and electricity on the doorstep, in the shopping centre and over the telephone. Among other things, they include rules on the selection, training and control of sales staff and the auditing of sales.

We were instrumental in the introduction of protections, known as marketing licence conditions, into gas supply licences, following the problems that accompanied the introduction of domestic gas competition in 1996. They were duly incorporated into electricity supply licences when the domestic electricity market was opened to competition. In 2000, Ofgem extended the conditions for a further two years, and took the opportunity to enhance them during that period, extending them to cover high street and shopping centre sales. Last month, following consultation, it extended them for a further two years.

In the light of responses to that consultation, Ofgem is currently considering how the conditions might be enhanced to make them operate more effectively for consumers. I understand that, for example, Ofgem is considering the practicality of developing a doorstep preference scheme along the lines of the telephone preference service overseen by Oftel. The conditions have two roles; the first is to allow Ofgem to undertake formal action against suppliers, and it has used them in this way. Last month, Ofgem acquired the right to levy financial penalties on companies breaching licence conditions. That will be another weapon in its armoury, and will give the marketing conditions added weight. Away from the glare of public, formal action, the conditions also provide an invaluable, informal method of improving the behaviour of suppliers. Once again, I emphasise the statistics that I quoted from the outset; that behaviour has not improved to a sufficient degree.

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In addition to our encouragement of Ofgem to develop the marketing conditions, we underlined our commitment to assisting energy consumers by using the Utilities Act 2000 to create Energywatch as a vigorous advocate for gas and electricity consumers, and to give Ofgem the new principal objective of protecting consumers.

In tandem with this, we must remember what we as consumers can do to help ourselves. Of course, salesmen should not mislead, but we do not expect a tied salesman to do anything other than sell his product. People have to be on the look out for that. Let us not be surprised if he does not tell us about the range of offers in the market. If we were buying most goods or services, we would do a little research. We would not take the word of a salesman.

One of our objectives in establishing Energywatch was to create an organisation that would not only protect consumers and fight their corner against the industry, but help consumers help themselves, by educating them about the market and making them more demanding of the suppliers. Energywatch can provide comparative data on prices. It can also provide links to websites that make calculations for the individual. We live in an active market. It is important to say that, although the problems are huge, cause a great deal of individual distress—I have no doubt about that—and discredit the workings of the market as a whole, it is important to give perspective to the benefits of the market that operates.

In the period since 1996, that market has become extraordinarily active. About 6.7 million domestic gas consumers—34 per cent. of the total—are no longer with British Gas. About 7.5 million electricity consumers—31 per cent.—are no longer with their local supplier. In the last quarter of 2001, domestic gas and electricity transfers were running at 940,000 per month. That is an astonishing rate of activity, and it shows an astonishing recognition of the benefits that individuals can gain from competition. It puts in perspective, although in no way diminishes, the figure of 13,000-plus complaints that I cited at the outset.

During 2001, Energywatch received 39,000 gas complaints. A total of 43 per cent.—17,000—related to transfers, but not necessarily erroneous transfers. Moreover, 7 per cent.—3,000—related to sales practices. In the case of electricity, there were 37,000 complaints, of which 38 per cent.—14,000—related to transfers and 12 per cent.—4,000—to sales practices. Again, I emphasise recognition of the numerical scale of the problem. To carry out a quick piece of arithmetic, the idea of 13,000 complaints in one month does not imply to me that the problem is diminishing. It is increasing, and I recognise that.

Earlier this year, Energywatch launched its "Stop Now!" campaign, directed at mis-selling. One result of that will be that, next week, the suppliers will be coming together with Energywatch, Ofgem and the Department of Trade and Industry to discuss the problems of mis-selling and to identify solutions. The debate has been very helpful in focusing attention on the issues and statistics that underlie the discussions.

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I end as I began; I believe the figures quoted at the outset to be totally unacceptable. I believe that the individual distress underlying those activities is totally

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unacceptable. I call particularly on the companies that I mentioned earlier to clean up their act before they bring the whole industry into disrepute.

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