The Office of Fair Trading (OFT) have decided in favour of heating oil companies after some concerns were raised last winter, suggesting that companies had been ripping customers off.
Between September and December last winter, the average price of heating oil used by many customers who are not on the gas network shot up by 70%.
The OFT indicated that this price spike was temporary and was a result of a 40% increase in demand and extra problems in supplying the fuel caused by severe weather at the time. They also added that fluctuations in the price of crude oil were also largely to blame for the increase.
However, the price of crude oil only rose by 17% between the Months of September 2010 and December 2010.
Approximately 15% of homes in the UK are not connected to the gas network and have to use alternative fuel suppliers in order to heat their homes. This accounts for 4 million homes in the UK. Approximately 2.3 million of these homes use electricity to heat their home, 1.1 million homes use heating oil, a further 310,000 use solid fuel and 170,000 use LPG.
Many people who use heating oil to heat their homes have indicated concerns about the long term security of the supply of this type of fuel. A lack of competition amongst suppliers and the lack of transparency in the market has added further worry. Some customers have also faced problems with deliveries, pricing arrangements and even theft.
However, the OFT have indicated that 97% of people who use heating oil have a choice of at least 4 different suppliers which indicated that competition in the market was good and helped to restrain the price of the fuel.
The OFT did find evidence which suggested that some firms have been using some questionable practices. They are now looking into claims that some suppliers charged more for the fuel as it was delivered, after quoting a lower price to the customer when they initially placed their order.
They are also investigating whether some LPG customers were locked into a contract which charged too much after their introductory offer expired. They are also looking into whether some firms have been mis-selling solar panels to people.
The OFT have already taken action against some companies who had websites which posed as a genuine price comparison site.
A spokesperson from Which? suggested that the 70% price increase for heating oil was a serious problem. They also pointed out that no action had been taken by the OFT to protect customers against the possibility that this could happen again this winter.
Audrey Gallacher from Consumer Focus said: “It is welcome that the OFT has taken action on comparison sites and is looking further into issues on dodgy pricing practices and contract lockins.
But as many customers will be worried about prices this winter, they need to see action taken quickly and strong protections in place.”