Off-Grid Energy Market

Charles Hendry Excerpts

Tuesday 18th October 2011 Written Statements

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

In my statement of 21 January, I informed the House that I wrote to ask the Office of Fair Trading (OFT) to bring forward its off-grid energy market study. I subsequently advised the House that the OFT had agreed to this. I can now report that the OFT has today published its findings from the market study into the off-grid energy market.

The market study focuses on the three main off-grid energy sources: heating oil, liquefied petroleum gas (LPG) and micro-generation. The study examined the available evidence to find few competition concerns in the heating oil market with 97% of consumers having access to four or more independent suppliers. Nevertheless, OFT will continue to look at any evidence of specific market abuse and will take action as necessary.

The study did find that action is needed to protect heating oil consumers in some areas. In September the OFT acted against some heating oil price comparison websites as to their independence—consumers need to be confident that price comparisons are what they seem. The OFT also has particular concerns where heating oil suppliers charge a different price on delivery from that quoted when the order was taken. A successful prosecution by trading standards in August for a supplier misquoting prices has affirmed the law. The OFT is actively examining a number of practices and is engaging with industry to ensure consumer law compliance and will take swift enforcement action as necessary.

Different issues arise in the LPG market where the study has commented on the generally positive initial impact of the Competition Commission Orders from 2009 to make it easier for consumers to switch supplier and that the OFT will continue to monitor this area. The study also comments upon consumer issues in the micro-generation market. Here the Government are supporting the microgeneration certification scheme (MCS), an industry-led certification scheme with an OFT-level consumer code of practice. Only MCS certified installers and products are eligible for the renewable heat premium payment grant scheme.

The study recognises the hugely challenging conditions in December 2010 with 20% of annual heating oil demand being delivered in three working weeks of that month when snow and ice disrupted the road network. Ahead of next winter, my Department has been working with industry and consumer bodies, in a national campaign launched in mid-September, to encourage heating oil customers to order early and ensure they are well prepared for winter. We have also reminded the downstream oil industry to ensure that they have sufficient salt to maintain access at their terminals and depots.

Work by the Department for Transport to improve winter resilience has ensured that the country will enter this winter season well prepared—this includes having a national strategic salt reserve; setting up a salt stock portal to monitor how much stock local highway authorities hold; as well as making sure councils make best use of their salt supplies. While we have to acknowledge there may be some transport disruption in the event of severe winter weather, this work ensures that the country’s transport systems are better equipped to cope.

I welcome the OFT’s action to address the concerns of consumers and its continued engagement in these markets that complement our continuing wider work to improve resilience ahead of next winter.