That is absolutely right, especially in relation to bulk supplies of oil and gas, for which a single payment can be £600 or £800.
The high prices are compounded by the fact that off-grid households cannot benefit from the range of discounts, such as those associated with dual fuel bills, that on-grid customers enjoy. Similarly, many energy-saving schemes promoted by the Government have, in the words of Citizens Advice when giving evidence to the all-party group,
“not been particularly effective at improving the energy efficiency of off-grid properties.”
Previous schemes, such as the carbon emissions reduction target, have incentivised energy suppliers to provide energy-efficiency improvements to consumers. However, the process used to assess the progress made by different energy suppliers—the system of a point for each household improved—encouraged suppliers to focus on easy-to-improve households. As many off-grid properties were far from easy to improve, having solid, hard-to-insulate walls and being situated in isolated locations, they were accorded a low priority. As a result, many off-grid households missed out.
The all-party group’s report shows that a considerable number of off-grid gas energy consumers believe that the high prices that they have to contend with result from a lack of competition among suppliers. I have been aware of those concerns for some time, and following the winter of 2010-11, when the price of heating oil in my constituency rocketed, I joined others in calling for an Office of Fair Trading inquiry into the off-grid energy market. I am very grateful to the former Energy
Minister, my hon. Friend the Member for Wealden (Charles Hendry), for listening to the concerns and for asking the OFT to instigate just such an inquiry. However, while the OFT concluded that the off-grid market was working well and gave most off-grid customers a choice of suppliers, the all-party group’s report indicates that the all-clear issued by the OFT may be premature.
Crucially, the OFT analysed the number of suppliers in a given area by postcode. That approach throws up a number of issues. It has been argued that analysis by postcode district is not sufficiently detailed to give an accurate assessment of the number of functioning suppliers for any one address in that district, as postcode districts can cover many square miles and thousands of households. In particular, sparsely populated rural areas, which are most likely to be off-grid, by definition cover a larger expanse. The average rural postcode for England and Wales comprises 55 square miles, compared with 14 square miles for urban areas. That large rural postcode size means that, although a postcode could be served by five different suppliers, each supplier could feasibly serve only one district within it—a district large enough to support one whole company, but that comprises only a small proportion of the postcode area. Consumers living in that district would therefore have a very limited choice of suppler.
In giving evidence to the all-party group, the OFT admitted that its approach overlooked a lack of competition in rural areas, stating that many rural districts
“actually only support a very small number of suppliers, perhaps two or even only one.”
The first-class Cornish charity Community Energy Plus gave further evidence to the all-party group of a lack of competition in very rural areas served by small, local companies, commenting that
“a lot of the companies have an existing customer base and they’re actually unwilling to expand… that results in… a lack of competition”.
It therefore appears that the OFT inquiry may not paint a comprehensive picture of the state of the market and that a lack of competition may well be a further issue affecting off-grid energy consumers.