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The great scrappage scheme heist

April 6th, 2010 · No Comments

Energy giants are profiteering from Labour’s green boiler plans with higher charges

Some of Britain’s largest energy suppliers are cashing in on the government’s boiler scrappage scheme by levying sky-high charges and effectively cancelling out the benefit.

Under the scheme, the government puts £400 towards the cost of replacing a Grade-G boiler, and many firms claim to match this with a further £400 discount. However, British Gas, for example, which last week posted a 58% rise in profits — hitting a record £595m — has been charging significantly more for replacement boilers than local independent suppliers, rendering the scrappage vouchers worthless.

Although British Gas says its prices have fallen 10% since last year, customers are still paying much more — as much as £2,800 for a job that would cost £1,600 through an average local installer, according to figures based on a study by Which?, the consumer group. This is assuming an £800 discount from British Gas, compared with a £400 discount from the smaller firm.

Peter Thom, of Green Heat, a heating engineer, said customers who had first gone to British Gas for a quote were offered deals costing about £1,000 more than his company charges — completely cancelling out the value of the scrappage voucher. In one case, the difference was £2,000. “People may want to go for a better-known firm but they don’t necessarily offer the cheapest service,” he said.

A British Gas spokesman said: “We’ve been working with manufacturers to ensure a good deal for customers as well as improving our processes to ensure we can offer good value in a very competitive market. Customers know they can trust us and our after-sales care.”

Consumer groups are also angered by the fact that, despite a 60% reduction in wholesale energy prices since their peak in summer 2008, suppliers have cut standard prices by less than 10%.

Scottish Power, which announced an 8% increase in profits last week, last cut bills in March 2009, and by only 7.5% for gas and 3% for electricity. Others such as Eon, EDF and Npower have not yet passed on cuts for gas, having raised rates by as much as 40% in 2008.

British Gas, which cut its gas rates by 7%, is the only provider to reduce its standard rates this year. Meanwhile, the energy regulator estimates that companies have boosted profits by some 40% to £105 per household during the winter — the coldest for 30 years.

An Ofgem spokesman said: “Ofgem’s analysis clearly shows that there is scope for companies to pass on recent falls in wholesale energy costs to consumers and this has been borne out by British Gas’s recent price cut. Other suppliers would be foolish not to pass on this reduction to consumers.”

Some smaller players are, however, beginning to push through cheaper deals on to the market.

First Utility, a relatively new entrant into the retail energy market with about 40,000 customers, now offers a dual-fuel tariff for an average £889 a year with its variable iSave version 3 rate. The best deal from British Gas is Websaver 6, which costs £899.

Ed Miliband, the energy and climate change secretary, has called on all the major energy suppliers to cut bills as soon as possible. It comes as households face high costs following the unusually cold winter.

Here we offer advice on scrappage and how to make the most of the new energy price war.

1 SCRAPPAGE Although British Gas and other suppliers may charge more, it is worth getting a quote from them and then comparing it with local independent providers.

Check your installer is registered with the Institute of Domestic Heating and Environmental Engineers (idhee.org.uk) or the Heating & Hot water Industry Council (centralheating.co.uk). Both websites will locate a qualified engineer in your area.

The boiler scrappage scheme gives households £400 to replace old boilers with a new, energy-efficient model. British Gas, Eon, Npower and Scottish and Southern have matched the government scheme by offering an additional £400 discount. To qualify for scrappage, households must have a working G-rated boiler, which is likely to be more than 15 years old and gas-fired, with a permanent pilot light.

Applicants arrange a quote for a new boiler and pay the installer, then claim back £400 from the Energy Saving Trust, which should be paid within 25 days. About half the 125,000 government vouchers have already been allocated.

2 WHICH IS THE CHEAPEST SUPPLIER? The cheapest fixed and variable deals are available from smaller providers. First Utility has the lowest priced deal overall at £889, while Ovo energy, has the cheapest fix at £920 for one year.

Both have early exit penalties, however. First Utility customers will lose a £105 discount paid after 12 months if they leave within this time, while Ovo will charge its dual-fuel customers £60 if they leave within the first 12 months. Remember, though, smaller firms may not have the same level of customer services as some of the larger players. Check comments on consumer forums (moneysupermarket.com/c/utilities/) to get customer experiences.

Scott Byrom, energy manager at moneysupermarket.com, said: “It really isn’t all about price but about getting the best deal and the right product for you.”

If you prefer one of the big suppliers, British Gas has the cheapest deal at £899. Customers are charged £60 if they leave before August.

3 SHOULD I SWITCH NOW?

Joe Malinowski, of comparison site theenergyshop.com says that by moving away from a standard tariff to a direct debit online deal, you can save an average £216 a year. “Customers shouldn’t be waiting for modest price cuts on standard deals, they should get some real savings by going for a discounted tariff.”

If you have switched from a standard deal already, you may want to wait. Mark Todd of energyhelpline.com says he would wait about a month before making a decision. “I expect the other suppliers will cut rates in the next few weeks. Once this happens you will find a better range of tariffs to chose from.”

4 SHOULD I FIX?

Fixed-rate deals levy a set rate per unit of energy used for the duration of the deal. These have traditionally been more expensive but the gap between variable and fixed rates has narrowed.

Todd likes Ovo’s fixed deal, saying it provides the security of a fix for 12 months for an extra £30 a year over the First Utility tariff. “There’s no guarantee that wholesale rates will not rise again,” he said.

POWER DRIVE

Motorists who switch to electric cars will receive a government grant of up to £5,000 from January 2011, the Department for Transport announced last week.

Anyone who buys a fully electric or plug-in hybrid car, which runs on electricity for the first few miles before switching to petrol, will receive 25% off the price — up to a maximum of £5,000 — as part of a £260m green drive.

However, they could struggle to find somewhere to charge up. Although London, Milton Keynes and the northeast will be the first to benefit, with the rollout of 11,000 charging points by the end of 2013, only 2,000 will be installed next year. And only 79% of those will be fast-charge points where drivers can charge their batteries to 80% in 20 minutes.

The Office for Low Emission Vehicles said: “It is expected that the majority of people will charge their electric cars at home overnight or at work.”

Tags: Boilers

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