Heating oil households to face another hard winter?OFT report says there's no competition problem

18 October 2011

LPG Tank

Despite huge price rises last winter, an Office of Fair Trading (OFT) investigation into off-grid energy has today ruled that competition in the heating oil and LPG market works well, and that the off-grid energy market does not need price regulation.

Almost 15% of UK households are not connected to the gas grid, meaning they have to heat their homes with other fuels such as heating oil or LPG. The average spent by Which? members who use heating oil is £1,265 a year.

Last winter, the average price of heating oil soared by more than 70% in just three months, between September and December 2010. In the same period crude oil prices went up by only 17%. 

Heating oil

Which? members have told us they've encountered problems with deliveries, differences between quoted and invoiced prices and the theft of oil. Members are concerned about the long-term security of supply and an apparent lack of competition and transparency in the off-grid market.

Which? fed back these concerns to the OFT, which announced in January that it was undertaking a market study looking at the supply of off-grid energy.

While it did identify problems with consumer protection, the report is likely to provide little reassurance to the four million householders who are not connected to the main gas grid after last year's price hike.

No competition concerns

The OFT said it found few concerns about competition in the market and that 97% of heating oil customers had a choice of at least four suppliers. It assigns last winter's price rises to a sudden increase in demand and severe weather conditions leading to a 'price spike'. 

Which? energy expert Sylvia Baron says: 'How can a 70% price increase not be seen as a problem? With the OFT taking no action, there seems to be little in place to protect off-grid consumers from another such price spike this coming winter.'

Concerns around consumer protection

The OFT did however find some concerns around consumer protection, including:

  • suppliers charging a different price on delivery from that quoted at the time of placing the order
  • consumers being locked into expensive LPG contracts following an initial introductory rate
  • potential mis-selling of solar panels (as first undercovered by Which?)

The OFT will be working with industry and trade associations to address these problems.

Alternative ways to power your home

A survey of Which? members living off the gas grid found that six in 10 have have considered microgeneration technologies such as solar panels, but only 15% were likely to proceed and install these technologies. 

While generous financial incentives are available for electricity microgenerators, such as wind turbines or solar PV panels through the feed-in tariff, smaller grants are currently available for heating technologies through the Renewable Heat Incentive (RHI) Premium Payment

  • £300 for a solar thermal heating system (available to all households regardless of the type of heating system used)
  • £850 for an air source heat pump (for homes without mains gas heating only)
  • £950 for a biomass boiler (for homes without mains gas heating only)
  • £1,250 for ground source heat pump installations (for homes without mains gas heating only). 

But more might be available from October 2012 via the RHI but the details of which have not yet been announced.

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