Select Committee on Constitution Minutes of Evidence


Examination of Witness (Questions 468-479)

WEDNESDAY 14 MAY 2003

MS ANN ROBINSON AND MS LESLEY DAVIES

Chairman

  468. We have the paper that you have put in to us, which is extremely helpful. Before we put some questions to you based on that, is there anything you would like to say to the committee, or are you happy for us to get underway with the questions?
  (Ms Robinson) I would like to say two minutes' worth.

  469. Go ahead.
  (Ms Robinson) As you know, we were established by the Utilities Act 2000 and we have a responsibility for all consumers. However, I think it worth saying at the outset how we interpreted our responsibility under the Act. I saw it as doing three big things. The first was to deal with all the complaints, wherever they came from, but not just to deal with complaints. I also saw it as important to give advice and information, because I think it is very important to educate consumers so that they can handle the market themselves. The second thing is that I thought it was very important to do something to improve companies' own performance. I did not want to preside over an organisation that simply dealt with the same complaints today, tomorrow and the day after. If we were not changing the performance of companies, then we were not really doing our job; we were not making a difference to consumers. The third big thing that I thought was very important was that, given that we were going to be very close to consumers, we ought to be very much in the position where we had a very strong view on their behalf and we influenced government, Parliament, the regulator, and whoever else we had to influence. So that, for instance, quite apart from being involved in regulatory matters of one sort or another, we have also been very much involved in the generation of the Energy White Paper. I have taken it upon myself over the last two years to bring together a group of different consumer representatives, representing big business, small business, people from the fuel lobby, to bring all consumer opinion together. I think that we have had some success in doing that. There are some final things I want to mention, because I think that you will be particularly interested in these. You will know that we work very closely with Ofgem. As Clare said, I believe that our relationship with Ofgem has improved. It is spiky on occasions, and I will touch on one area in a second. The whole of the relationship is governed by a memorandum of understanding which governs a lot of our day-to-day relationships. One vital thing, for example, is how we get information from industry. We do not want to be making life hell for industry by duplication information requests. That is one area, but there are other areas that we work on. More recently, I think that we are beginning to have some success with Ofgem in working on areas of common concern. For instance, we jointly agreed this year that we would work together to try to improve the transfer process, to help people who want to switch suppliers—which is obviously very important in relation to competition. All of that is good, I think. The big difference, and the big bit of spikiness between us, is probably about how we view competition. Ofgem will take the view that competition is very healthy at the moment, because 38 or 39 per cent of people switch. We take the view that it is not healthy enough. Furthermore, we take the view—as the Competition Commission has recently had a change in its remit so that consumer benefit is at the heart of what it does and as the OFT, as a result of the Enterprise Act, now has a lot more clout in relation to consumer protection—should the regulatory activity and focus be more on supporting the 38 or 39 per cent who have switched or should there be protection of the people who have not switched? That manifests itself in a number of different areas, but I think that is probably the biggest thing. Overall, we see ourselves—it is our reason for being, and certainly my reason for being—as having to be strong and influential advocates of consumers, both singly and collectively.

  470. The first question really picks up on your last point. Since you are the voice of consumers, how do you know that you are the voice of consumers?
  (Ms Robinson) I can never say that we are truly the voice of all consumers, because we do not know that. I think that we are the voice of consumers to an extent. We have seen, for example, that our complaints since we have been established have gone up from 80,000 to over 110,000. It is one measure of the fact that more people are recognising us. Our complaints come from a range of people, a range of geographic locations. We also have a separate and quite successful agenda, working with large industrial and commercial representatives, which I think is important. If I am totally honest, however, I think that there are three areas that need some improvement. First of all, I do not think enough people know about us. I suspect that less than 10 per cent of the population know of our existence. So until we get our recognition factor up, how can we be truly representative? Secondly, I do not believe that we are doing enough for small businesses. We do get some small business complaints, but I would like to try to focus a little more on small businesses. The third area is that, although we started to do some of this work, I recognise that there are a lot of people who will not come to us. They do not go to CABs; they do not go anywhere. I am talking about disadvantaged people. I hate using that word, but it is the fact. Perhaps living on large estates, or people for whom English is not the first language. We have started a programme of taking ourselves out into the community; taking services out to them. But it is not ambitious enough; we are not doing enough, and one of the reasons why we are not doing enough—and this is my excuse at the moment—is that we have had no more resources than we had when we were first set up, and we have had to deal with a lot more complaints. So it has been a struggle to do additional work of this sort, although we have done some.

Lord Acton

  471. In The Times today, I read a most excellent article headed, "Bills Leave Consumers Powerless". It starts, "Billing blunders by energy firms have left two million gas and electricity customers in debt, a consumer watchdog claims", and it ends, "Ann Robinson, the chairwoman, blamed the energy firms for causing customers distress, frustration and inconvenience". Judged by this article, you are a strong and, I am sure, influential advocate. However, I want to know, in relation to this matter, looking at your raison d'e®tre which you have written here at 2.1, is this something you would have gone to Ofgem about first? As far as I understand it, you have two different ways of talking to Ofgem. You have the power to report the outcome of an investigation. Is this the outcome of an investigation? Did you report it to Ofgem, and what did they do about it? Or you can obtain and keep under review information about consumer matters and the views of consumers on such matters and keep Ofgem, the DTI, and the OFT informed about consumer matters. Thirdly, you can inform the public. Can you tell me what happened?
  (Ms Robinson) I will tell you precisely what happened. It was not actually a matter of an investigation. These are the complaints that are coming in, day in and day out. It is almost half of all of our complaints. So we knew it was a very serious problem and we knew the nature of the problem. It would make you weep if you read some of the things that come in to us—people in really desperate circumstances. We did decide some time ago that billing was something we wanted to tackle and we wanted to campaign on. Again, we are limited. You cannot really run more than one or two major campaigns at a time. Last year, we were running a very successful campaign about mis-selling. There is no doubt in my mind that, whatever the regulator might say, it was largely our campaign that persuaded the regulator to take a hard look at the licence condition on this, and we have had some success on that. This did come out of our complaints. We have talked to Ofgem. Ofgem have been listening to us, but it was pretty clear to me that this was not going to feature high on Ofgem's list of actions to tackle. This was an area where it was not just one particular company failing; I think that the whole industry is failing their consumers. The only way to get action was to campaign strongly to deliver change.

  472. You have heard the previous evidence about the idea of having some sort of appeals mechanism. What do you think about that?
  (Ms Robinson) I am campaigning on billing, and I think that is probably the best route for companies to change on billing. There is another area that is very close to my heart, and why I do believe that some sort of appeals mechanism is right. We have a problem right now that we have a two-tier price on electricity. We go back to the point that I was making earlier about the two-thirds that have remained loyal to their original suppliers. They can be paying up to 20 per cent more. On an average, they are paying 8 per cent more than people who switch. There is an issue, is there not, as far as the regulator is concerned? I do not see any sign of the regulator being prepared to look very seriously at that issue, because the line is taken that, "Competition is working. So many people have switched. Therefore, everything is okay, isn't it?". But I am taking the line that, because two-thirds have not switched, they require a degree of protection that is not there at the moment. In that situation, I would dearly love to take something like that to the Competition Commission for a view, because I do not think two-tier pricing reflects the competitive market. If we had it, it would not be happening. Secondly, there are issues around two-tier pricing—about the structure of the market, about the vertical integration that is going on. Are we satisfied that the wholesale market and the retail market are working effectively as two separate markets? Those are big questions on which I would like to have a clear, objective, outside-the-industry view.

  473. On the matter of mis-billing, what exactly are you trying to achieve by your publicity campaign? Are you trying to get Ofgem to put it up the ladder? Are you trying to get the companies to change their practices, or both, or what? This is not in any sense in the spirit of criticism. I am all for it.
  (Ms Robinson) No, I judge from your earlier remarks that you are all for it. I will tell you what this is really about. I am very keen to get the industry almost to self-regulate itself. We are going down that route with mis-selling. I think that the industry should and ought to put its own house in order. So we want to work with the industry to change a number of things. But if self-regulation does not work, then I will have to think about where to take it. When you think about billing, we have a really good example here. If people cannot understand their bills, if they are not getting regular bills, how can they make price comparisons and how can they operate in this competitive marketplace? I think that bad billing is also anti-competitive. It is also bad news for energy efficiency. One of the things I am keen on is something like an annual statement, so people can know exactly what energy they have used and what it has cost them—that may make them stop and think, "Should I be switching my supplier?". It may also make them stop and think, "Am I using my energy as efficiently as I should do? Could I save money by managing my energy use slightly differently?".

Baroness Gould of Potternewton

  474. Having seen a number of people being interviewed on television now about the points you have made about the two-tier price structure and so on—and the same would probably apply to myself—when somebody comes to sell me something on the doorstep, I do not know whether I would get a good deal by switching or not switching. It seems to me that there is a big knowledge vacuum, and I do not know how that gets filled: whether it is your responsibility to fill it or whether it is Ofgem's responsibility to fill it. Somehow there has to be a means by which people can draw those comparisons, so that they know what decision to take. How do you see that moving in the future?
  (Ms Robinson) I agree 100 per cent, and I think that we have a major responsibility for that. We now produce some price comparison fact sheets that help. This is why I mentioned at the very beginning that my number one thing is not just to deal with complaints; it is advice and information, so that people are more knowledgeable. It is why I want to go out into the community; why I want more people to know about us; why I want to get more publicity. I also want to put people in a position where they are not just making comparisons on price: they are also making comparisons on service.

  475. You said that one of the problems you had—and I understand this—is the funding and resources that are available to you.
  (Ms Robinson) Yes.

  476. Because I do not have a picture of how big an organisation you are, I wonder if you can tell us about your structure, how you work, and what resources you actually do have and if there are any restrictions on those resources?
  (Ms Robinson) Obviously we have to clear our staffing numbers with our sponsor department. I will start with the easiest bit first. Our total resources at the moment are £10.8 million, and we are paid for out of the licence fees. I have high hopes and expectations that I shall get some more money this year to help towards the increased workload. How we are structured is slightly complicated, but I will do my best to explain it simply. We have six offices in England, one in Scotland and one in Wales, but to think of it just in terms of eight offices is the wrong approach. Each of those offices contains teams of people who focus on one particular geographical area and are responsible for delivering all the services to that one geographical area. In other words, within good management, good arrangements and sensible use of resources, we try to get as small and as local as we can do.

  477. At the end of the paper you highlight some of the differences that you have with Ofgem in relation to the consultation process, and perhaps Ofgem giving you more detail of the rationale of why they take decisions and so on. How do you see that being resolved? Do you see a situation where you will be able to say, "Ofgem are giving us what we need to be able to do our job"? Can you see a movement in the way that Ofgem works?
  (Ms Robinson) I will ask my colleague Lesley Davies to answer that question. She has more day-to-day dealings with Ofgem than I do.
  (Ms Davies) It is a good question that you raise, but I would like to look at it in a slightly different way. The issue that we have in terms of the consultation process and the extent to which Ofgem take into account our views is more about how we are affecting their decision-making process than it is about how their work affects what we do. There is much that Ofgem could do to improve the consultation process that would make it more transparent and accountable. You have discussed much of that today with Clare, about it being more open, more inclusive. Some of the issues around the use of regulatory impact assessments, for example, and, as we have mentioned in our response to you, the use of consumer impact assessments would be quite effective. One of the things that we would like to see Ofgem do much more of is more cost benefit analysis of the policies that they are attempting to implement. I asked one of my colleagues today—just to do a finger-in-the-air exercise, as you do when you come to these events—whether they could actually remember the last time they had seen a cost benefit analysis that Ofgem had put into the public domain, and they could not. I have to say that we do not respond to all of Ofgem's many consultations, so I would not suggest for an instant that that is an absolute representation. We have requested that Ofgem undertake cost benefit analyses on several occasions, in terms of some of the responses that we have made in the past 12 months. I think that if all of that happened—and you have spent a long time talking about the appeal process—and you actually dealt with the cause of some of the issues as opposed to a symptom, and you actually had a good, strong, robust, open, transparent and inclusive consultation process, where people felt that their views were listened to and that Ofgem themselves were prepared to change their mind, based on available evidence, then you have a much more constructive process from the start and you need appeals far less.

Lord Jauncey of Tullichettle

  478. Can I take you up on two points you have made this afternoon and one in your paper, Ms Robinson? First of all, in answer to one of my colleagues you said, "We consider that competition is not enough". What did you have in mind? That there were not enough alternative suppliers of energy and there should be more, to give the customer greater choice?
  (Ms Robinson) There is a big issue in terms of the numbers of people who are now the big players in the market, the big suppliers, and what that means in terms of competition. I do not think that it has got so far that it is a real problem yet, but it is something that needs to be looked at. My issue is more to do with the fact of how competition is gaining ground generally. It is back to the point I was raising earlier—the position where less than 40 per cent of people have switched. It is really that issue, about whether or not competition is truly working in this industry.

  479. How realistic is the desire for competition in all cases? Take the situation where the supplier of electricity is also the owner of the transmission lines. If a consumer supplied by that particular company elects to go elsewhere and then there are problems—for example, in the transmission—how does he get it repaired? Can you almost divorce the actual supply from the ownership of the lines?
  (Ms Robinson) It is in fact divorced, because the distribution companies are run separately from the supply companies. When we talk about vertical integration, it is where someone has a generation business and a retail business. The actual monopoly bit is quite separate.


 
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