Examination of Witness (Questions 468-479)|
WEDNESDAY 14 MAY 2003
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
(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
supplierswhich 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 viewas 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 protectionshould
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 ourselvesit is our reason
for being, and certainly my reason for beingas having to
be strong and influential advocates of consumers, both singly
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 enoughand this is my excuse at the
momentis 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.
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 uspeople
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 pricingabout 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
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
(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 themthat 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 onand the same would probably apply
to myselfwhen 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 hadand
I understand thisis 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 todayjust
to do a finger-in-the-air exercise, as you do when you come to
these eventswhether 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 happenedand
you have spent a long time talking about the appeal processand
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 earlierthe
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 problemsfor example, in the transmissionhow
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.