Free Electricity Market

Free market - for some

From 14th October, the first four areas of the country, those consumers of electricity served by Eastern, MANWEB, Yorkshire Electricity and Scottish Power have been able to start choosing a new supplier of electricity. By the end of the year all fourteen regional electricity supply companies will have begun to liberalise their markets, but we do not know yet how much all competing suppliers will charge.

Although the existing cost of servicing a customer - and this is all that is being thrown open to competition - is around 6% of the total cost of supplying electricity, the Electricity Association claims, according to the Guardian of September 10th, that consumers will be able to achieve savings of about 10% by shopping around after 14th October. The industry regulator, OFFER, is reported in the same article as suggesting that, by the end of June next year when all consumers will be able to choose their supplier and national supply companies emerge, savings could be more than 10%. NfCG's Ken Frere wonders where savings of 10%, let alone further savings, will come from?

The market is being liberalised not by supplier areas but by geographical areas, based on post codes. An inquiry by the Editor to the free "consumer hot-line" set up by OFFER (0800 451 451) revealed that he will only be able to shop around in March next year, though other customers of London Electricity will be able to do so in December. Similarly, in the area covered by Central Herts Consumer Group, electricity customers will be able to buy electricity on the open market in either December 1998 or March 1999, depending on their post code.

Most prices still to be revealed

Ken Frere comments that it is clear existing Regional Electricity Companies are relying on customer inertia, rather than competition, to hold on to domestic customers in their existing franchise areas.

The Autumn issue of Trident, the Central Herts Consumer Group's quarterly magazine, contains a useful article about changing supplier. There is, however, little in the way of price comparison as most potential suppliers have not made prices known yet. No less than 23 suppliers were approached by NfCG regarding their arrangements for supply and charges, but only half a dozen replied and only two quoted prices - Eastern Electricity and British Gas. Of the two, British Gas is noticeably cheaper for higher consumption households. Their apparent national rate for electricity paid quarterly is 5.37p per unit, plus a quarterly charge of £10.89, with a discount of £14 if you continue to buy their (more expensive) gas. As the domestic gas market stabilises, British Gas may become more competitive, making the choosing of one's energy suppliers even more complicated. Since our enquiry some other price information has emerged. SWALEC seems likely to offer a range of prices to customers outside their existing franchise area, with units being charged at 6.18p in the Southern Electric area rising to 6.52p in the MANWEB area. Their existing customers will still have to pay 7.26p. All prices exclude VAT.

Invest in SWEB?

To complicate comparisons, reports Ken Frere, existing SWEB customers are offered 8% net (10% to 13% gross) interest on a "loan" of £350, paid as a discount of £6.65 against each normal quarterly bill while you leave your money in the scheme. SWEB's Economy Seven-day rate is 7.54p per unit. It follows therefore that, if your £350 is currently invested and earning you 5% gross and your electricity bill is £500 a year, using daytime Economy Seven, you only need a saving of 3.5% on your total bill to be better off with another company. A keen market watcher will have noticed, however, that parts of the SWEB area will not be opened to competition until June 1999, so if you happen to have' £350 to hand, this scheme could be worthwhile, whatever your bill - but do remember to shop around in the spring.

Simple to change

The Trident article explains that no change is necessary in wiring or meter. Your chosen supplier is responsible for feeding an amount of electricity into the system, providing you with service, and of course, charging you. to change to a new supplier you will have to sign a contract, quoting your meter reference number which is on your electricity bill. Your new supplier will inform the supplier you are leaving and arrange a meter reading (or ask you to do it) on the changeover date. You will receive a final bill from your old supplier.

Contracts may be 'rolling', that is continuing as long as you or the supplier wishes, but capable of being terminated by giving 28 days' notice, or 'fixed period', perhaps for one year. There may be a penalty for ending a fixed period contract before it expires, unless it is because you are moving house. Your new supplier is responsible for providing an emergency service and for reading your meter and looking after it, the 'company's fuse' and incoming supply cable. Au oddity is that the meter, fuse and cable remain the property of your original supplier.

OFFER, as well as setting up a hot line, has published a free book about competition in electricity supply, from which Central Herts Consumer Group obtained the above information. It is cunningly titled "How Does Electricity Competition Affect You?". Call their regional office, which should be in the phone book, for your copy, or perhaps better still call the free hot line 0800 451 451] for access to all their information material, which includes a list of potential suppliers, with contact numbers. OFFER says that it will publish a price comparison, but not until December.

Return to Index for current issue                         Return to Main Magazine Index