Wednesday, 6 April 2011

Is Co-operative Energy the Answer to a Toothless OFGEM?

In last month’s Morning Star we heard that Ofgem (the energy regulator) was giving the energy utilities “one last chance” to stop ripping customers off or face a full bloodied Competition Commission inquiry. The regulator said that it had found evidence that the 'big six' suppliers – EDF, British Gas, E.ON, RWE npower, Scottish and Southern and Scottish Power – increase customers' bills more quickly when wholesale energy costs go up than they cut them when they come down.

Talk about stating the blinking obvious. No wonder Mike O'Connor, chief executive of Consumer Focus, said: "Consumers have less confidence in energy companies than in any other sector – they feel that prices aren't fair, that tariffs are too complex and that the market doesn't treat them well."

It seems there has been as much wind generated from energy sector investigations as there has been energy from wind. To date this is the 18th inquiry. It was greedy energy companies increasing bills to near-record highs on the back of last winter’s record low temperatures that put pressure for Ofgem to investigate the sector for making excessive profits yet again.

After this investigation, Alistair Buchanan, Ofgem chief, ordered the power companies to simplify the bewildering array of 350 different available tariffs which they use to bamboozle customers and make price comparisons nigh on impossible. He added that there was still not enough competition and threatened them with a Competition Commission referral. In response the industry has been working overtime lobbying politicians and the media, warning that a referral, would delay their spending plans and new nuclear plants and an expansion of renewables until the outcome is clear.

Unsurprisingly, the former Rugby schoolboy, Tory Energy Minister Charles Hendry MP, whose business career was in Public Relations, (with Ogilvy & Mather and Burson-Marsteller), soon got to work - representing the industry. Last month he seemed to back the firms when he said of the big six that a Competition referral could scare them off from investing in the UK. It appears his corporate networking skills, he was founder of the Agenda Group, a specialist consultancy helping company Chairmen and CEO’s with corporate networking, have paid off!

Many industry insiders however think that Ofgem’s position is mere posturing as a Competition Commission referral would in reality expose Ofgem’s own failings and its role in creating the current system.

Clearly for ordinary consumers the privatisation of our energy supply industry has been a disaster. The structure has been described as “one of pretend competition and impotent regulation” but whilst we are waiting for a government with the backbone to take back the industry is there anything we can do as consumers?
Well I have decided to make the switch to the new kid on the block: Co-operative Energy, the brainchild of the UK’s third largest consumer co-operative Midcounties Co-operative Society.

I had been buying my energy via the TUC affinity scheme ‘Union Energy’ supplied by Scottish Power however when that scheme came to an end I was left buying my energy from Iberdrola S.A. as Scottish Power has been taken over by the giant Spanish utility.

This lead to an enlightening telephone conversation with someone from Scottish Power – they rang me up to ask me why I was switching. I said I had sympathy for the plight of the Spanish economy and great respect for the Basque people but I did not see why the profits from supplying me with energy should go to Bilbao. The person was clueless as to who the owners of the business he was working for where and found it hard to believe I could have a stake in the business I bought my energy from.
So I have given Co-operative Energy a chance, switching has been remarkably easy, with no shareholders to please, at least the decisions they make are in my best interests and by becoming a Midcounties member I get a share of the profits. They pledge that they will always offer a fair price and whilst they may not be the cheapest at certain points, they aim to make sure they’re competitive over the long-term.

They also pledge to have just one simple price (that’s a relief) with no gimmicks, and to make everything as simple as possible such as explaining how the energy is sourced and how the prices are worked out, being open and transparent in everything they do.

They aim for the carbon content of their electricity to be less than half the national average by April 2012 and like all co-operative businesses, aim to be ethical in their dealings with individuals and businesses.

The Co-operative supply of energy is not uncommon around the world; indeed in the land of the so called free some 47 of those United States have co-operative electricity suppliers. If you do an internet search for the ‘Co-operative Energy Company’ you may find yourself in Sibley, Iowa. The most impressive US electricity co-operative business is Touchstone Energy, an alliance of energy co-operatives, it has the highest customer satisfaction rating of all US energy utilities, so is it any wonder it has some 40 million customers.

Co-operative Energy is a new business and it will take a while to get to that level of membership but the more members it has the greater will be its buying power. The new business also faces that fact that its current energy mix may not be as biased towards renewable as some would wish but it does aim to be competitive and to work towards lower carbon inputs.

Well if Co-operative Energy this side of the Atlantic fails to fulfill its pledges they will have me to deal with at their AGM. So if you are fed up with being taken for a sucker by Ofgem and want to give the ‘big six’ energy companies a miss why not see if Co-operative Energy is for you. To find out more go to: