Complainant: OFT own initiative, following the OFT's Off-Grid
Energy Market Study published in October 2011
Case reference: MP-SIP18-21, MP-SIP23
Relevant instruments: Enterprise Act 2002, Unfair Terms in Consumer
Contracts Regulations 1999, Consumer Protection from Unfair Trading
This action follows the publication of the OFT's Off-Grid Energy
which identified concerns that some suppliers may not be treating their
customers fairly. The OFT was concerned by potentially unfair terms in
contracts for the domestic supply of bulk LPG, and that some aspects of
other customer communications may potentially be misleading.
Summary of work
During the course of the Off-Grid Energy Market Study, the OFT received
complaints that some people may be locked into domestic bulk LPG
contracts with significant and unavoidable price increases. On
investigation we found a mixed picture, with some but not all suppliers
offering customers the opportunity to exit the contract in the event of
prices increasing beyond a certain threshold.
The OFT worked with the major bulk LPG suppliers in the UK to secure
improvements to the clarity of their terms and conditions and other
relevant customer communications, so that their domestic customers can
better understand how prices can move, their switching and termination
rights, and the associated exit costs.
The major UK suppliers of domestic bulk LPG ('the major suppliers')
Avanti Gas Limited (a subsidiary of UGI Corporation)
BP Oil UK Limited trading as BP Gas (a subsidiary of BP plc)
Calor Gas Limited and its sister company Calor Gas Northern Ireland
Limited (both subsidiaries of SHV Holdings NV)
Flogas UK Limited and DCC Energy Limited trading as Flogas Northern
Ireland (both subsidiaries of DCC plc).
The major suppliers have voluntarily agreed to make changes to their
relevant documents to address what were in the OFT's view, in varying
degrees, potentially unfair and/or misleading terms. The suppliers have
engaged constructively with the OFT in this process and we appreciate
The concerns raised by the OFT varied by supplier and primarily related
to two areas:
All suppliers made improvements to their terms and conditions to address
our concerns. Furthermore, Calor Gas Northern Ireland Limited, Flogas UK
Limited, and DCC Energy Limited trading as Flogas Northern Ireland,
agreed to make changes to improve the cancellation rights offered to
customers when prices rise beyond a specified threshold.
The major suppliers have agreed to make the relevant changes in their
future new contracts and to offer the same benefits to customers on
A number of the changes are to clarify current practice in order to
improve transparency for the consumer, and do not necessarily mean that
changes were needed to the suppliers' actual business practices.
The main areas where improvements have been made are described in more
detail below. A summary of key changes will also be published on the
OFT's Consumer Regulations Website shortly.
The OFT has sought improvements in termination clauses in order to
clarify, or to better balance, the rights of suppliers and customers.
Agreements to amend price variation clauses
In particular, the OFT secured amendments to the contracts of Calor Gas
Northern Ireland, Flogas UK and DCC Energy trading as Flogas Northern
Ireland to allow customers to cancel their agreement in the event of a
price increase beyond a specified threshold. Previously, these
suppliers' contracts did not allow such cancellation rights.
Calor Gas Northern Ireland, Flogas UK and DCC Energy have all signed
undertakings to change the price variation terms in their future new
contracts and to offer customers on existing contracts the same benefits
as new customers when the price goes up beyond a specified
threshold. These companies will also, in future, publish their terms and
conditions on their websites.
No further action was required in respect of Avanti Gas, BP Gas and
Calor Gas, whose terms and conditions contained terms allowing customers
to cancel the agreement in the event of a price increase beyond a
Other improvements include drawing customers' attention to their
inherent rights, such as their right to cancel if the supplier commits a
very serious breach of their obligations.
The Competition Commission Orders
The OFT referred the domestic bulk LPG market in the UK to the CC in
2004. The CC published a report on its investigation into this market in
2006. The CC identified adverse effects on competition in the market and
made two Orders which sought to remedy these concerns, taking effect in
2009. One Order applies to domestic customers supplied from individual
bulk LPG tanks. The other Order applies to domestic customers who share
a bulk LPG tank (metered estate customers). The OFT is responsible for
monitoring and enforcing the Orders.
For more information about the CC investigation and the Orders, please see the case page.
Agreements to clarify switching options and costs
The Orders aim to make it easier for domestic bulk LPG customers to
switch between suppliers. For this purpose they set out, among other
provisions, a maximum two year limit once a customer enters a new
agreement before the customer can switch suppliers (the exclusivity
period), timeframes for switching and restrictions on switching costs.
Where customers are allowed by the terms of their contract to terminate
their contract, whether within or outside their exclusivity period,
customers should be able to switch supplier according to the process set
out in the Orders. This means that the customer will not bear the costs
of tank transfer between suppliers. Nor will the customer bear any
direct costs associated with the removal of a tank where required in
order for their new supplier to install a new tank.
The major suppliers have agreed to amend their documents where necessary
to improve clarity regarding the exclusivity period, the circumstances
in which termination and/or switching can occur and/or the above costs
We note that in order for a metered estate to switch supplier under the
Orders, all metered estate customers must be eligible to switch and
agree to switch. However, an individual customer, where eligible to
terminate their agreement, could instead switch to an individual bulk
LPG tank or alternative form of energy supply.
Agreements to amend communications about the end of exclusivity periods
A supplier is also required to write to its customers to inform them
about their eligibility to switch at the end of their exclusivity
period. At this time, a customer can:
- Immediately give notice to switch to a new supplier.
- Continue with their current contract, with the ability to give
notice to switch at any time.
- Sign a new contract with their existing supplier, which will
initiate a new exclusivity period (this can be up to two years)
during which switching is prohibited. This may be attractive to
consumers, for example where the supplier offers sufficient
incentives to sign a new contract that outweigh the requirement for
Except for Calor Gas Northern Ireland where this was not a concern, all
the major suppliers have also agreed to amend the required
communications to clarify the above options, in particular confirming
that customers do not need to immediately enter into a new contract
unless they wish to do so.
The OFT has aimed to secure improved and clearer terms for domestic bulk
LPG consumers, particularly in respect of their switching and
cancellation rights. We have achieved this through voluntary agreements
from the major suppliers stated above to implement appropriate changes
and we appreciate these suppliers' cooperation.
It is important for a competitive market that consumers are able to
choose suppliers. This involves being able to switch suppliers and to
shop around effectively; and consumers rely on transparency of
information to be able to make informed choices. Our intervention should
help in these respects:
Better balanced and clearer switching and cancellation rights can help
consumers exercise choice in the market and thereby improve
competition. Consumers can benefit from the CC Orders to switch more
easily and the changes agreed could, by improving such opportunities
to switch, accelerate the impact of the CC Orders.
It is also important that people can shop around and make informed
decisions about which suppliers to use. The changes secured will make
it easier for people buying domestic bulk LPG to compare deals on
offer. Suppliers manage pricing differently over the course of a
contract and consumers should be aware of differences in price
variation and cancellation rights, alongside the initial price
offered, when making a purchasing decision. This is particularly
important where energy costs may continue to be high and volatile.
Finally, we note that we have worked with the major suppliers so that
we could quickly achieve improvements for the large majority of
domestic bulk LPG customers in the UK. However, the OFT and/or local
authority Trading Standards Services can take action wherever it
identifies further concerns. We therefore expect other, smaller
suppliers to take note of these voluntary agreements and, where
necessary, take immediate and appropriate action in respect of their
own business practices and/or materials.