No gas exchange allowed: Calor cynically locks in an entire village

For the majority of the UK population, it would be unthinkable to live somewhere untouched by the mains gas network. Most of the country benefits from a pool of aggressively competitive energy companies offering dual-fuel discounts, assorted tariffs, smart meters and other nice things. A plethora of price comparison websites plead for your business as the different companies jostle for position in this crowded market.

Surprisingly, one doesn’t need to venture too far from large towns to leave the mains gas grid behind. Take a drive into the country and you’ll see plenty of houses with their own bulk fuel tank, whether LPG (liquefied petroleum gas) or heating oil. There’s competition here, too; not as much as for the mains, but there are still quite a few companies offering tank rental and filling services. It works pretty well: they just turn up every so often and top up the tank.

There is a third category: so-called metered estates. These are typically new housing estates, built outwith the reach of mains gas, where the developer has arranged for a bulk LPG supplier to install large tanks that will feed the whole estate. Generally (although not always), the householders will have individual contracts with the supplier. Clearly this is an uncompetitive environment, as householders can’t switch suppliers, no matter what happens to their bills.

In 2004, the Office of Fair Trading referred the matter to the Competition Commission. After a lengthy consultation process, on 6th May 2009 the Commission made the snappily named Domestic Bulk Liquefied Petroleum Gas Market Investigation (Metered Estates) Order 2009. In theory, this piece of secondary legislation should have ensured that the metered estate market became competitive, giving residents the chance to enter the wider energy market and escape the bonds of their current supplier.

It didn’t quite work out like that. The Order stipulates that

Where a supply of domestic bulk LPG to customers is made pursuant to a number of individual contracts, no obligation to facilitate switching shall arise unless all those customers are not subject to an exclusivity period […] and resolve unanimously to switch. Customers must have resolved unanimously to switch at the time the request for the LPG infrastructure transfer is provided to the existing supplier. An existing or new supplier may require proof that customers unanimously agree […] and no obligations shall arise under this Order until such proof is received by the supplier that requires it.

Upper Rissington (satellite image)

Upper Rissington

From what I’ve said so far, that might not seem like too high a hurdle. You’re probably imagining a dozen houses on a little estate—maybe a few more—but not an unmanageable number for unanimity. However, I live on a metered estate called Upper Rissington, an ex-RAF base converted to private housing in 1997, and now a village with its own parish council. There are 332 households in the village, all of which are connected to the central LPG tanks. The supplier for the village is the gas giant Calor (now owned by the even bigger gas giant SHV Energy). I suspect that a metered estate of this scale was not in the minds of the Competition Commission when they drafted the Order.

As if seeking unanimity from 332 households isn’t hard enough, Calor took a cynical step to make a transfer of supplier effectively impossible. Shortly after the Order was made, each customer in the village received a letter inviting them to enter into an exclusivity contract with Calor in return for a £50 rebate on their gas bills (I believe the term was 24 months, but it might have been 12… if you still have the letter, I’d love to get a copy). The letter did refer to the Order but in my opinion it did not make clear the implications of signing up to their proposal. The effect, of course, is that if any one of their 332 customers signed on the dotted line, the entire village was effectively locked in for the term of their agreement. Presumably new customers are offered the same deal such that exclusivity terms will all overlap, and there is unlikely ever to be a time when no village residents are under such terms. Calor has rendered the Order—flawed as it is—completely ineffective. Calor now has a monopoly on the whole of Upper Rissington.

In 2010, the OFT recognised the problem in these terms:

Exclusive supply periods on contracts with different residents on a metered estate may end at different times. In this situation, it could take up to two years before a switch of supplier can be made, unless early termination of some or all contracts can be made by agreement with the existing supplier (e.g. by paying an early termination charge). However, the sooner that there is effective co-ordination between residents on metered estates in dealing with LPG suppliers, the sooner you might be able to switch to a new supplier. Ultimately it is the responsibility of the residents on estates to see that this co-ordination happens: it is not something in which the OFT can intervene directly.

In my view this is fair for a small estate, but completely impractical where hundreds of customers are involved. Clearly the root of the problem is a legislative failure, but I find Calor’s exploitation of the situation to be cynical and unethical.

I’d take my business elsewhere, but I can’t 😐

Update 2/4/12: I’ve collected all the information that I’ve gathered since this post was published.

13 Comments

Filed under politics, rants

13 Responses to No gas exchange allowed: Calor cynically locks in an entire village

  1. Londonlime

    very interesting!

  2. Mike Bolam

    We have a similar issue….pls contact on my email

  3. I am trying to switch but calor has managed to lock one resident in, by threatening us all with health and safety access issues! does anyone know of options?

  4. LPG Basher

    It is annoying that “one resident” can lock everyone in.

    Surely, LPG companies have to by law, notify other households on metered estate of the new contract termination date and deal that “one resident” has locked everyone into?

    Gas companies can either notify individual households or to a nominated estate spokesperson.

    That way prices can be kept under control.

    The “New Contract” deal can then be scrutinised by the other residents to check that it is the best deal available, if not, everyone can switch.

    Surely legislation covers that?

    • Ian Chard

      I haven’t been able to find any legislation that covers that. In fact it may be illegal for the gas supplier to tell residents details of customers’ contracts.

      • LPG Basher

        Yes, Data confidentiality prevents disclosure. The point I was raising is that it is ok for a third party to effectively extend my contract without my knowledge. The greed of Gas companies is high, when they know their customers can not shop around. I am lucky, I can switch to oil. LPG is never ever gonna be cheaper than mains gas or oil, if you are on a metered estate. FACT

        • Ian Chard

          Devil’s advocate: they’re not changing your contract, which you are free to cancel at any time. Of course this would leave you with no gas service, and you could as you say switch to oil. But clearly the situation is unsatisfactory and in my view requires some kind of statutory change to open up the market.

          I’m even luckier as I’ve now moved to an area serviced by mains gas. Even though I now live in a property with far poorer insulation, my gas bills are now around a *third* of what they used to be.

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