Punto de partida del Laboratorio: Diagnóstico de la FARES

Source: Prices collected twice-weekly from around 30 firms by CCNI, compared to jet kerosene price (OECD). Lines show: (Average price without VAT - wholesale price of jet kerosene)*(litres in the drop)

4.79 While, as noted in paragraph 4.76, there are many reasons why prices may vary between customers, we received complaints from some

consumers and consumer groups that at least some element of this price variation is unfair and makes it difficult for consumers to compare firms and be confident of finding the best deal. It was suggested by some stakeholders that firms should be required to publish their prices to make it easier for consumers to compare firms' offers and to ensure that all customers of a particular firm get the same price.

4.80 Price discrimination can have a variety of effects. It can potentially boost overall consumer welfare by allowing firms to offer lower prices to

consumers who may have lower ability to pay, while still covering their fixed costs. Firms' flexibility to vary their prices across customers that order on a single day also allows them to vary their prices in response to short-term fluctuations in demand, for example by reducing prices during

the course of the day if few customers are choosing them over competitors.

4.81 Nevertheless, price discrimination can be problematic for competition if it means that prices can be selectively discounted for those that shop around or bargain hard, which means firms can charge more to existing customers without fear of losing the custom of those that shop around.

Consequently, under some circumstances price discrimination can potentially be a breach of the Competition Act or consumer protection legislation.

4.82 The evidence for price discrimination in the industry comes from a number of sources. Both firms and consumers told us some firms will reduce prices for customers who bargain hard. We received a small number of allegations that some firms charge those on auto-top-up plans substantially more than other customers. Buying groups also argue that they obtain lower prices than other customers, although this can in part be driven by lower costs to serve these groups.

4.83 The concern is that those who shop around do not constrain prices for those that do not shop around. However, several firms told us that increasing numbers of customers are switching regularly, and that it would be difficult to distinguish, at the time of calling to ask for a price, between those that are shopping around and those that aren't. And many consumers do shop around: in the SPA survey, 46 per cent said they switch suppliers at least sometimes, and 50 per cent get quotes from different suppliers at least half the times they buy. 41 per cent bargain at least some of the time.

4.84 It is our view that the most proportionate response to concerns about price discrimination is to improve price transparency for consumers using auto-top up plans and to advise consumers of the value of shopping around and bargaining for the best available price. This protects the benefits of price variation across customers (particularly for buying groups) while addressing concerns in relation to auto-top-up plans. This approach can be implemented within the existing framework of

consumer law – our work with industry trade bodies on a best practice

approach to pricing and price information will cover, amongst other things, auto-top-up plans (see paragraphs 4.172 – 4.174).

Order sizes and affordability

4.85 While it is understandable that firms charge more per litre for smaller deliveries, we have been told by firms and consumers that people are increasingly buying heating oil in smaller amounts, which means that consumers might be paying more than they otherwise would. From firms, we heard that the average order size is around 900 litres, and among consumer respondents to the SPA survey it was a little under 800 litres. In some cases, smaller orders may be driven by small tank sizes – some newer tanks take up more space for a given capacity so that consumers wishing to minimise the space taken up by their tank are opting for smaller models. Only 20 per cent of consumers in our survey had a tank that could hold more than 1501 litres, and the average was around 1400 litres.

4.86 However, we heard from most firms we spoke to that smaller orders are often due to high prices and people's inability to afford larger deliveries, or unwillingness to pay large amounts in one go. In consequence, some consumers have complained to us about being unable to order in

quantities of less than 500 litres. However, the threshold is designed to ensure that the amount of oil delivered is accurately measured.

Regulations¹⁷⁷ enforced by Trading Standards dictate the minimum

volume of heating oil that can legally be delivered by road tanker using a mechanical meter.¹⁷⁸

4.87 In NI, stakeholders told us that high prices were driving consumers to buy small quantities of oil in 20 litre drums, even though this means paying more per litre overall. While a handful of people argued that sales

177 Measuring Instruments under Statutory Instrument No. 1269:2006 (Liquid fuel delivered from road tankers) Regulations

178 www.fpsonline.co.uk/BriefingNotes/MINIMUM%20VOLUME%20DELIVERIES.pdf

in this way should be banned, we would not advocate removing

consumers' choice over buying in this way when they are unable to get a bulk delivery, either because of delays in supply or because of limited budget.

4.88 To deal with the difficulties of budgeting for oil, most firms offer

methods to spread the cost of purchases, and in NI consumers can pre-pay through Paypoint or (in most areas) through a stamp savings

scheme. Stamp savings schemes are run by some councils and charities, where consumers buy stamps costing £5 or £10 to stick on a savings card. Consumers then redeem the card with a heating oil distributor that is part of the scheme. Paypoint is a pre-paid system that allows

customers to pay small amounts per week to a heating oil supplier. It is similar to monthly payment plans but a bank account is not required, since payment is via Paypoint rather than direct debit.

4.89 Fuel poverty is clearly a major concern, but goes wider than heating oil and is primarily one for government rather than an enforcer of

competition and consumer protection law – see Chapter 3 for discussion.