Four huge energy rip-offs no one has told you about

Mains supplied gas and electricity isn't the only utilities sector riddled with rip-offs. As Robert Powell find out, off-grid energy customers are just as vulnerable...

Do you feel ignored? Blocked out and shouted down by angry mains-supplied energy customers moaning about relentless hikes.

Yes, amidst all of the rate increases across the ‘big six’ energy companies, the off-grid group of utilities customers have been somewhat cast aside. And wrongly so; as there are just as many rip-offs in the off-grid energy sector as there are across the mains network...

Heating oil

Around 1.5 million UK households rely on tanks of the black stuff to heat their home and warm their water. Yet over the last few years the price of heating oil has escalated – hitting rural communities especially hard.

But in addition to general price rises, heating oil rates also fluctuate greatly from season-to-season; peaking in the winter and troughing in the summer. Prices can almost double in the matter of a few months as temperatures drop and homeowners stock up.

In the midst of widespread snow storms last December heating oil prices jumped from under 40p per litre to more than 70p per litre in some cases. And that’s not including any emergency delivery surcharges levied by many heating oil providers.

Indeed, price hikes in the heating oil sector were so great last winter that the Office of Fair Trading (OFT) opened an investigation, which is due to report next month.

The OFT will examine how well the off-grid energy market is working for consumers as well as looking at the impact of short-term market movements on fuel prices.

Granted, as a commercial industry, supply and demand will always play some role in the price of heating oil. However with seasonal price variations so great, families are essentially held to ransom by oil companies if they fail to stock up sufficiently or an especially hard winter strikes.

But market movements aren’t the regulator’s sole focus...

Price fixing

The OFT is also concerned about allegations of price fixing in certain parts of the country. These suspicions have been brought on by huge regional variations in the price of heating oil. In some parts of the country a litre of oil will cost £2, while in other the rate sits at just 50p.

Again, these regional variations will be, to an extent, influenced by the standard market mechanisms of supply and demand. However the OFT is worried that in certain areas large oil companies hold an effective monopoly, and hence can dictate prices.

These concerns were further highlighted in the results of another OFT investigation into the role of heating oil comparison websites.

Back in January I reported on the shady relationship between DCC Energy – an oil company that owns several smaller firms across the country – and the comparison site BoilerJuice. BoilerJuice markets itself as an independent site, however it’s actually owned by DCC.

The OFT has now said that BoilerJuice must be clearer about its links to DCC – which owns GB Oils Limited, the largest heating oil distributor in the UK – after the site was found to be listing higher prices than those actually charged by genuine local companies.

The Fuel Fighter heating oil site – owned by WCF Fuels Ltd – also got a slap on the knuckles from the regulator after false customer testimonials were found on the webpage. The OFT said these reviews were designed to market the site as an independent comparison service, when in fact only prices from the site’s parent company were listed.

Watchdog Consumer Focus welcomed the OFT’s report and urged anyone worried about the cost of oil to stock up before peak winter prices kicked in.

However the heating oil industry isn’t the only off-grid sector that has its fair share of rip-offs...

Independent gas transporters

Around one in 20 properties have their gas supplied by independent gas transporters (IGTs) rather than the National Grid network (or Transco). According to the price comparison site energyhelpline.com, many new properties will use IGTs as builders find that independent networks will offer more competitive prices for the connection work.

But as builders are profiting from IGTs, consumers are losing out.

The problem is that to pipe gas through independently owned networks, energy suppliers have to shell out to both the National Grid and the IGT – pushing up their costs. Often IGT connected homes will pay around £42 a year more than standard National Grid households.

However the good news is that over recent years four of the big six have axed their IGT fees with only E.ON and Npower retaining a £42 and £31.50 per year charge respectively. On some fixed tariffs SSE may also tack on an extra fee for IGT customers.

So if you do get your gas from either E.ON or Npower and are an IGT customer, it could be worth comparing energy tariffs again to ensure that you are getting the best possible deal.

Economy 7 tariffs

Economy 7 is an electric-only tariff that utilises two meters – one for daytime peak rates and one for night-time off-peak rates (usually 1am to 8am). They’re often used in large apartment blocks and were designed to work with storage heaters that charge up overnight and release energy throughout the day. However they can often end up being extremely expensive.

Obviously the aim if do find yourself on an Economy 7 tariff is try and use any high-powered appliances (washing machines, showers etc.) overnight. Yet this is not always possible or indeed desirable.

Marghaid Howie from energyhelpline.com was forced to start using an Economy 7 tariff when she moved into a rented apartment. But despite switching to the cheapest tariff available, in the last three months she has used just 189kWh of off-peak electricity (just over £7 worth!) compared to 1,800kWh of peak energy.

So if you’re a mains connected utilities customer, make sure you spare a thought – next time an extortionate bill drops through your door – for those stuck off-grid; as they’re probably shelling out more than you.

Your experiences

Do you use off-grid energy?

Let us know about any rip-off experiences you’ve had by posting in the comment box below.

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