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
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.
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.
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 Â£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.