Owed ‘mil­lions’, a town fights back against an en­ergy gi­ant

Res­i­dents of Stornoway be­lieve that they have paid over the odds to Cen­trica for years

The Observer - - Cash -

When Roddy Smith’s teenage daugh­ter be­came se­verely dis­abled, he and his wife sold their home and re­mort­gaged to buy and adapt a bun­ga­low to care for her. But their en­ergy costs soared as they tried to keep her warm through the long He­bridean win­ters. Smith says that ev­ery year he called his sup­plier, Scot­tish Gas, to get a bet­ter deal, and each time was told that there was only one stan­dard tar­iff in his area.

Their predica­ment highlights the ob­sta­cles faced by en­ergy cus­tomers who want to switch, de­spite rules to open up com­pe­ti­tion.

The Smiths, and some other res­i­dents in the Scot­tish town of Stornoway, have been trapped on a sin­gle, pricey, stan­dard tar­iff for years af­ter wrongly be­ing told they nei­ther qual­ify for cheaper deals nor have the op­tion of chang­ing providers, be­cause Cen­trica – which owns Bri­tish and Scot­tish Gas, and sup­plies one third of Bri­tish house­holds – is the only gas sup­plier to the is­land.

In a stand that should em­bolden thwarted cus­tomers across the land, a lo­cal guest­house owner has taken on the en­ergy gi­ant and is at­tempt­ing to claw back a mass re­bate af­ter dis­cov­er­ing many res­i­dents have been over­pay­ing by 30% for over 20 years.

Derek McPher­son’s five-year bat­tle has ex­posed how cor­po­ra­tions mis­lead cus­tomers with what is, at best, in­com­pe­tence, at worst, du­plic­ity.

Fuel poverty in the Western Isles is among the great­est in the coun­try, with over half of res­i­dents spend­ing more than 10% of their in­come on heat­ing. McPher­son reck­ons Scot­tish Gas’s re­fusal to trans­fer many ap­pli­cants to more af­ford­able deals has cost them mil­lions. “An el­derly neigh­bour told me she has to go to the old folk’s club ev­ery day it’s open as she can’t af­ford to heat her home,” he says.

Last month, Bri­tish Gas was obliged to pay £2.65m com­pen­sa­tion by reg­u­la­tor Ofgem, af­ter it was found to have moved more than 94,000 cus­tomers to its pricier stan­dard vari­able tar­iff when they changed sup­pli­ers.

Cen­trica has to of­fer its full range of tar­iffs to cus­tomers across the UK since the sec­tor was de­cen­tralised in 1995 and, in 2015, sup­pli­ers were obliged to in­form cus­tomers of the best deals on their bills.

McPher­son first asked for a cheaper op­tion in 2013 af­ter dis­cov­er­ing his sis­ter on the main­land was pay­ing Scot­tish Gas much less. It told him that, as the is­land was off-grid and sup­plied with piped propane rather than nat­u­ral gas, there was only one tar­iff. To his sur­prise, the com­pany sent him a cheque for £102 two months later to re­flect the dis­count he had “lost out on over the last year”.

That win­ter he again asked if there was a more af­ford­able plan. This time, Scot­tish Gas de­clared that of­f­grid cus­tomers, such as him­self, were “heav­ily sub­sidised” as they were charged the same stan­dard tar­iff as nat­u­ral gas cus­tomers, de­spite the higher cost of ship­ping piped propane to the is­lands. It ar­gued that it re­mained the sole sup­plier be­cause no other en­ergy com­pany would choose to sup­ply is­lan­ders at a loss.

It was two years later when McPher­son dis­cov­ered that Cen­trica does not pay for piped propane to be trans­ported. Since 1995, the cost has been borne by cus­tomers across the UK, who pay a tiny levy to cover the ex­pense of sup­ply­ing four re­mote of­f­grid ar­eas, in­clud­ing Stornoway and two dis­tricts in Wales.

This cost-shar­ing strat­egy is called “so­cial­i­sa­tion” and, in re­turn, Ofgem re­quired Cen­trica, the only sup­plier to those four dis­tricts, to make all its tar­iffs avail­able to them.

The first Stornoway res­i­dents of­fi­cially knew of a cheaper op­tion was in 2016 when their bills ad­ver­tised a dual-fuel deal with Sains­bury’s En­ergy, sav­ing up to 50%. McPher­son again ap­plied to switch and was told that this deal did not sup­ply piped propane and that the in­for­ma­tion would be re­moved from fu­ture bills. In fact, Sains­bury’s En­ergy is a brand sold by … none other than Cen­trica.

McPher­son com­plained to the om­buds­man, but its in­ves­ti­ga­tion was shut down by Scot­tish Gas, which falsely claimed that he was a bot­tledgas cus­tomer and there­fore out­side the om­buds­man’s re­mit.

McPher­son then turned to Ofgem, which opened an in­quiry. He be­lieves ev­i­dence re­quested from Scot­tish Gas was tam­pered with. Two copies of McPher­son’s 2016 bill, which had first alerted him to the Sains­bury’s tar­iff, had had the of­fer re­moved, he says. More­over, a neigh­bour was re­fused a re­bate for the years he was de­nied the tar­iff be­cause Sains­bury’s had “only started sup­ply­ing the town in 2017”, but when a record­ing of the con­ver­sa­tion was submitted in ev­i­dence, that cru­cial false­hood was miss­ing.

Ofgem has de­cided there is no ev­i­dence to show that it was pol­icy to deny cus­tomers af­ford­able deals and that mis­in­for­ma­tion was a re­sult of “poorly drawn” brief­ings. It merely an­nounced it had “made it clear” that Cen­trica cus­tomers should be “cor­rectly in­formed” rather than of­fi­cially sanc­tion­ing it for flout­ing the law.

Stornoway MP Angus MacNeil, who has sup­ported McPher­son’s cam­paign, is act­ing for over 40 con­stituents who say they were re­fused the Sains­bury’s tar­iff. He has re­jected Ofgem’s find­ings as “as­ton­ish­ing” and writ­ten to Cen­trica’s chief ex­ec­u­tive, Mark Hodges, three times to ask why cus­tomers were so mis­led. He has re­ceived no re­ply.

“The sav­ings my con­stituents have been de­nied have been put in the pock­ets of the gas com­pany, and Ofgem is be­hav­ing tooth­lessly,” he says. “Scot­tish Gas is claim­ing Derek was the only res­i­dent af­fected. In fact, I know the 40 who have con­tacted me to be a huge un­der-rep­re­sen­ta­tion.”

Ofgem told the Ob­server it had seen no ev­i­dence that a “sub­stan­tive” num­ber of peo­ple had been “de­lib­er­ately or sys­tem­at­i­cally de­nied cheaper tar­iffs”. It de­clined to clar­ify what num­ber it con­sid­ered “sub­stan­tive”.

Cen­trica says it has no record of Roddy Smith be­ing de­nied a cheaper tar­iff. It de­clined to an­swer the Ob­server’s ques­tions about the years when it had de­flected other res­i­dents and said: “It is not cor­rect to sug­gest that cus­tomers in Stornoway are be­ing de­nied ac­cess to the best avail­able tar­iffs. Hun­dreds of our cus­tomers have switched tar­iff to take ad­van­tage of a dif­fer­ent deal. We write reg­u­larly to all Scot­tish Gas cus­tomers telling them if there is a cheaper tar­iff.”

It has paid McPher­son £1,545.62 to make up the amount he would have saved on the Sains­bury’s tar­iff plus £500 com­pen­sa­tion, but he wants it to com­pen­sate oth­ers. The Sains­bury’s tar­iff has been in­creased, so sav­ings are min­i­mal. “The re­al­ity is, we are as badly off as ever,” he says. “We are re­stricted to Cen­trica’s cheap­est tar­iff, from which main­land cus­tomers are flee­ing like deer be­fore a for­est fire.”

‘An el­derly neigh­bour told me she has to go to the old folks’ club as she can’t af­ford to heat her home’ Derek McPher­son, res­i­dent

Pho­to­graph by Murdo MacLeod for the Ob­server

Stornoway is tak­ing a stand that could em­bolden cus­tomers across the coun­try.

Derek McPher­son first asked for a cheaper en­ergy deal five years ago.

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