Official Report: Minutes of Evidence

The Chairperson (Mr Brett): I welcome our colleagues from the Competition and Markets Authority (CMA) and thank them for the work that they have done on this important issue. Given the reliance on oil in Northern Ireland by many of our constituents, colleagues are particularly interested in this. I am happy to hand over to the CMA for its opening remarks.

Ms Juliette Enser (Competition and Markets Authority): Thank you very much, Chair, for the invitation to provide you with evidence. I am particularly grateful because, from the outset of doing this piece of work, we recognised the importance of heating oil in Northern Ireland and the need to understand the specifics of the market here. Therefore, it is good to have the opportunity to come here to talk through the findings of our report in person.

I will begin with a brief overview of the Competition and Markets Authority. We are a non-ministerial UK Government Department. Our role is to promote competition and protect consumers, but not in the abstract. Our clear end goal is to promote economic growth and household prosperity. We are a UK-wide body and take that role seriously. We want to ensure that our work reflects the whole of the UK, so we have offices in each of the devolved nations, including one in Belfast, where we have more than 30 staff. Having that dedicated Northern Ireland presence helps us work closely with stakeholders, the Executive and the Assembly and understand the local business and consumer landscape.

In March of this year, at the outset of the Middle East crisis, we moved quickly to try to understand the impacts, particularly in the areas of energy and fuel. We heard a lot about the concerns facing consumers and businesses. We heard those concerns directly, but we also heard from Government, parliamentarians and consumer organisations, particularly when it came to heating oil. We heard that consumers were facing sudden price rises, existing orders were being cancelled and customers were being offered new quotes at significantly increased prices. Unsurprisingly, those issues were particularly prevalent in areas of high heating oil reliance, such as Northern Ireland. It exposed how vulnerable households can be when wholesale costs rise suddenly and supplier practices come under pressure.

As a result, we opened a market study, which is what we are here to talk to you about, and a separate workstream under our consumer protection work to examine specific supplier practices during the price shock, including what happened when consumers had already agreed a price and then saw their orders being cancelled.

If we are talking about a market study, I thought that it might be helpful if I explained what a market study is. With a market study, we can use statutory information powers to formally request information from businesses, identify problems and consider solutions, including making recommendations to government.

We combine those statutory information powers with expertise, particularly in economics, markets and consumer protection. That means that we can bring those elements together to make quite a detailed and robust evidence base, which then underpins the recommendations that we make. In this case, we looked at prices, as you would expect, and competition. We also looked at price transparency and the consumer experience in normal conditions as well as in periods of volatility. Geoff will talk, in a minute, in a bit more detail about what we found.

As I said at the start, we were very clear from the outset that we really needed to understand the Northern Ireland market, recognising that heating oil is a mainstream household energy source in Northern Ireland. I am sure that you are familiar with the fact that more than 60% of households use heating oil here. That amounts to almost one third of the UK's total usage. Obviously, that means that shocks in heating oil markets have a direct impact on the majority of Northern Ireland households, and it is particularly acute for those who are already vulnerable.

As part of the market study, we engaged, as we always do, with Governments, consumer organisations and industry associations, including the Department for the Economy, Trading Standards Service (TSS) Northern Ireland and the Consumer Council for Northern Ireland (CCNI). I put on record our great thanks to those stakeholders who supported the market study. In particular, the Consumer Council's price checker information was invaluable to us, as were its wider insights and evidence on consumer experience.

Having launched the study at the start of the Middle East crisis, when we first heard of the issues coming to light, we made recommendations about four months later. For us, that is pretty quick, which was in recognition of the urgency of the issues. We made a number of recommendations, including to the Executive, which we will come on to discuss.

I will hand over to Geoff to talk over the detail of our findings, but, broadly, we found that competition was working pretty well, with prices broadly tracking wholesale cost movements. However, clearly, that is not enough to protect consumers, so we found that competition in and of itself is not working to protect consumers in the market, particularly in, but not limited to, times of volatility. Notably, they lack the basic protections that are available to on-grid customers. Clearly, that matters when you are talking about something as essential as home heating oil.

That is why our main recommendation, including for Northern Ireland, is the setting up of a new, proportionate regulatory regime that would establish minimum safeguards for all customers when it comes to issues such as how prices are quoted, cancellation rights and what happens when something goes wrong, as well as better protection for vulnerable consumers.

Clearly, we are not suggesting that the market for on-grid heating oil should operate the same way, and there are many reasons why you cannot take the regulatory model for on-grid energy and apply it to heating oil. However, our evidence base shows that, for heating oil customers, there is a clear gap in consumer protections, particularly when compared to on-grid customers.

Geoff, do you want to talk through what we found regarding prices and competition?

Mr Geoff Steadman (Competition and Markets Authority): With regard to price and competition, as Juliette said, we did not see evidence of a general lack of competition driving poor outcomes in the market in Northern Ireland or in the rest of the UK.

For the UK as a whole, we found that the vast majority of households benefited from a good choice of suppliers, with only around 3% of postcode districts having a choice of only one or two distributors. We found that the Northern Ireland market is structurally a bit different from what we saw in Great Britain, as a much higher proportion of households use home heating oil, consumers are concentrated in smaller areas, and so average delivery costs are lower. Northern Ireland also has a good number of suppliers across the board, with all postcode districts served by five or more distributors. With tools such as the CCNI price checker, there is also good price transparency. In normal trading conditions, outside crisis times, consumers are able to use that tracker to help to make sure that they get a good deal, driving good competition between suppliers by shopping around more.

Those features contribute to Northern Ireland customers paying the lowest prices, on average, across the four nations, albeit it might not feel like that at the moment as prices remain higher than in the past. In Northern Ireland and across Great Britain, everybody saw huge price increases following the start of the crisis. CCNI data suggests that prices in Northern Ireland jumped from around 64p per litre to 124p per litre in the first week of March.

We wanted to understand the causes of the price increases that we observed and to see whether there was any evidence of profiteering at retail level. We found that the vast majority of the increase in March reflected increases in wholesale costs. Around 83% of the increase between February and March was accounted for by wholesale costs, with a further 6% being due to increases in operating costs. By comparison, only about 11% was due to increases in distributor profits. Therefore, although there was some increase in distributor profits, that was a small part of the picture. In all parts of the UK, the increased margins appear to have reflected a temporary weakening of competition. Demand for fuel increased as people tried to get ahead of price inflation and ordered as quickly as they could. At the same time, distributors were facing constraints on what they could supply.

I will turn to the consumer experience. The purpose of the slide that I am showing is to give a sense of who we spoke to and where we collected information from. We heard from a wide range of consumer organisations and third-sector organisations. As members can see, we considered complaints, consumer survey evidence and pricing data from the Consumer Council as well as information collected from the Trading Standards Service in Northern Ireland. We also ran a round-table session with key Northern Ireland consumer groups and collected evidence from a number of Northern Ireland-based suppliers.

Juliette has trailed a little of what we found on the consumer side, but, as members know, one of the big differences between heating oil and other on-grid energy sources is that heating oil is not regulated. Home heating oil households are not protected by the standards and safeguards that are in place for on-grid households. That leaves gaps in the protections that are available to heating oil households, most notably vulnerable consumers. To take one example, the Utility Regulator (UR) places a requirement on firms to not disconnect a customer for unpaid bills if they are vulnerable or live alone, particularly during the winter period. No corresponding provision is in place for those who use heating oil.

We also found that there were gaps in access to redress, with processes in place for home heating oil stopping short of the dispute resolution systems that are in place for on-grid energy sources. For example, in Great Britain, consumers can take issues to the Energy Ombudsman, and it can make decisions that are binding on regulated firms. In Northern Ireland, some issues can be escalated to the Utility Regulator for it to make a determination.

We also found that distributors' terms and conditions are inconsistent. That makes it really hard for customers to know what to expect from distributors. We saw differences in the extent to which firms would guarantee the price that they were quoted and in the circumstances in which they would vary the price when heating oil was ultimately delivered. When that is volatile, it obviously makes it particularly hard for heating oil customers. It is already a stressful time as regards obtaining heating oil and making some very costly purchases, but that lack of clarity can add to the stress.

Following the crisis, we saw increases in the issues faced by consumers. Complaints to the CCNI and TSSNI increased. CCNI said that it usually has five complaints a year but that it received 48 in the six weeks after the start of the crisis. While those numbers might sound low, in the CCNI survey, three in 10 customers said that they had noticed a change in supplier behaviour since the conflict. The survey also said that 2% of heating oil customers had made a complaint over the past year, which suggests that around 7,500 households had made complaints in that period. The gap between that reported experience and formal complaints is consistent with what we were told at the round table, namely that consumers might not know how to complain or who to complain to.

Alongside those conduct issues, there are also affordability and financial vulnerability concerns. The CCNI survey found that 40% of respondents had gone without sufficient heating oil in the previous year because they could not afford it. Taken together, those findings tell us that, even in a relatively competitive market, consumers can still face real harm when prices rise quickly or supplier practices come under pressure. I now hand back to Juliette to talk about recommendations.

Ms Enser: I recognise that we have been talking for a bit now, so I will run through this relatively quickly. Our key recommendation is that the Northern Ireland Executive should establish a new, proportionate regulatory regime for home heating oil distributors. We also made an equivalent recommendation for Great Britain. In practical terms, that would mean distributors' customers benefiting from mandatory minimum standards when it comes to issues such as cancellations or redress and clearer records of households that rely on heating oil and better priority support for vulnerable customers during periods of volatility, backed up by appropriate monitoring and enforcement powers for the regulator.

Our report recommends that the detailed design should be taken forward by the Department for the Economy and the Utility Regulator, while recognising and building on the roles already played by the Consumer Council and the Trading Standards Service. Equally, however, we recognise that the final decision on what any regulatory regime looks like, including which body should take responsibility, rests with the Minister in the Northern Ireland Executive. For us, the important point is that there needs to be a body with the right levers to set expectations, oversee compliance and ensure effective redress.

We also recommended as an interim step, recognising that a regulatory framework may take some time to deliver, that the Executive and consumer bodies work with the Northern Ireland Oil Federation to strengthen the existing voluntary consumer protection initiatives. We made a number of other recommendations that intend to make the market more transparent. For example, better signposting of payment plans and a minimum order volume, so that customers know what options are available to them, which will enable them to make good decisions as prices are rising and, potentially, spread their purchases a bit.

The last recommendation that we made was around targeting future support more effectively. In our report, we noted that some factors make some areas more exposed to high prices or supply disruption, including distance from supply points and density. At the moment, as Geoff explained, Northern Ireland performs comparatively well on those indicators because it is a relatively dense network, but the findings could still help inform future schemes, particularly as we are conscious that the market is likely to evolve away from heating oil, at which point you would expect some of the issues about the distance that the oil is being transported to become more relevant here. I will stop now. Obviously, I am very happy to answer any questions.

The Chairperson (Mr Brett): Thank you very much. First, I will pick up on recommendation 3 of your report, which is about minimum ordering. Can you explain that? Is there a restriction on that, or are you saying that a restriction should be introduced?

Ms Enser: Ideally, it helps customers if they are able to purchase relatively small volumes, particularly because the price fluctuates widely, so some consumers might want to top up with only a small amount when the prices are high and to make further purchases. We found that it is more possible to do that in Northern Ireland than it is in the rest of the UK, and it seems to be more common here than in the rest of the UK. However, we still thought that it would be worth the Executive considering whether there are any restrictions that might render it harder for suppliers to offer minimum volumes, and, if so, to see whether that should be changed.

The Chairperson (Mr Brett): What are the restrictions?

Ms Enser: The restrictions might be related to the measurement of volumes in the lorries and the tanks.

The Chairperson (Mr Brett): OK. Thank you.

The report is useful. Ultimately, it is a massive issue that concerns me, and, no doubt, all our colleagues are aware of the impact that it has on vulnerable households and their ability to heat their homes. You have said that there should be regulation, but it needs to be proportionate. The Committee is looking at a Bill on the role of the Utility Regulator. Should the Utility Regulator be the body that is responsible for the limited regulation of the oil market?

Ms Enser: Our recommendation is for the Utility Regulator to take on a regulatory role, and that recognises the fact that we are talking about energy and that there may be crossovers with other forms of energy when it comes to, for example, identifying vulnerable customers. Equally, I am conscious that there are other organisations in Northern Ireland, such as CCNI and the Trading Standards Service, that already do some work in that space. Our suggestion is to make sure that the regulatory regime builds on the existing work. Ultimately, the question of which institution takes on the regulatory regime is a matter for the Executive, who have a better understanding of the regulatory landscape, if there is one, and where it makes most sense for that to sit.

The Chairperson (Mr Brett): You may think that. [Laughter.]

Mr Kearney: Thank you for the presentation and the report. I will make a couple of broad observations as a backdrop to my substantive question. It all comes down to the extent of reliance on non-renewables, specifically oil, in the regional economy. We have now had almost five years of persistent global instability because of the invasion of Ukraine in eastern Europe and, now, the deepening instability in the Middle East. It underlines the extent to which we, in this part of the world, are exposed to the shocks that flow from that type of instability.

Of course, it also underlines the urgency of our moving as quickly as possible away from a reliance on those kinds of fossil-based energy sources and increasing our reliance on renewable energy, particularly for heating homes.

I noted your point, Juliette, on consumer vulnerability. Apologies, it might have been your colleague who made the point that the spike in consumer complaints was, in itself, not very significant numerically but that, relative to the normal or average number of complaints, it was significant. In the period that we are looking at, there were 48 complaints, but I think that that number masks a level of distress and concern on the part of vulnerable consumers that is higher than we realise, given that, as one of you said, it is to do with how they flag an issue, raise a concern or have someone advocate on their behalf. There is a high level of vulnerability there, for the reasons that I mentioned.

Your point on the need or potential for a minimalist regulatory regime is a well made, but does the logic of your argument for a regulatory regime relating to matters such as deliveries, breach of contract and so on not extend to the need for a regulated price cap, given the persistent context of instability, our exposure to the shocks that flow from that and, of course, the greater reliance by consumers in the North on oil for heating, especially those who are most vulnerable and the least well off? Will you clarify your thinking on that particular point?

Ms Enser: For the reasons that you have set out clearly, we did think about that. We thought about whether it made sense to recommend some sort of price control in the market. The reason why we did not do that goes back to what I said about the fact that, generally, prices are broadly tracking the wholesale costs. Ultimately, we do not think that having a price cap would particularly solve the issue, because, if the wholesale costs, rather than the retailer margin, are causing the issue, having a price cap will still leave consumers exposed, assuming that it is set at a price that would allow distributors to purchase the oil in what is, essentially, a global market.

We were also concerned that having a price cap of some sort could, in fact, make the situation worse. In a situation where supplies are potentially quite limited, if it were harder for distributors to make money because of a price cap, that might deter them from supplying customers who are more expensive to supply. That could make the situation worse for some customers. Geoff, I do not know whether there is more that you want to say.

Mr Steadman: I will make one further point on the vulnerable consumer angle. We share the concern that it is hard to identify the issues that vulnerable consumers might face. At the moment, there is no register of heating oil customers and those who should be considered vulnerable. It is a bit of a chicken-and-egg issue at the moment, and it is hard to identify issues. There is also one point about the link between the measures that we set out and the costs ultimately faced by vulnerable consumers. The report states that a register of vulnerable consumers would assist with targeting support more effectively. If it were known who most needed support, any future subsidy or support that needed to be rolled out could be targeted more effectively if that information were available. It is not our role to comment on how big subsidies should be or what subsidies should exist, but that was one benefit that we saw of having that approach.

Ms Enser: That brings us back to the point about minimum order volumes and signing payment plans so that consumers would at least know what possibilities exist for them, potentially, to spread their payments.

Mr Kearney: Thanks for your answers. It is a fine line that has to be walked. Speaking personally, I am not entirely convinced that we should not be looking at the logic of a regulated price cap in these circumstances. Your report is interesting, and I appreciate your input, Geoff and Juliette, this morning.

Mr Nesbitt: Good morning, and thank you for your report. Some consumers club together in an effort to drag down price. Have you any intelligence on those collectives — their number, reach and impact on price — and is there any evidence of suppliers targeting geographic areas, presuming that there is no legal or ethical impediment to their so doing ?

Mr Steadman: During the study, we heard that one way to get better deals is for consumers to form buying groups, which can be effective. We found that it was harder for consumers to use those buying groups as effectively during the period of the huge price spike. We could possibly follow up with more detail on that point. It was not a point that we majored on in the study, but it may have to been to do with collectively getting hold of the volumes needed or those involved all needing volumes at exactly the same time. I think that they were less effective as a means of containing the huge price inflation that we saw.

By "suppliers targeting", did you mean the targeting of buying groups?

Mr Nesbitt: I am a supplier, and I go to Massey Avenue at the bottom of the hill and leaflet every household.

Mr Steadman: Did we see evidence of suppliers targeting specific areas with advertising? We did not look into that. We focused on understanding the extent of competition in a given area, clarifying how many options there were for consumers in a given location and whether there were areas that we should be concerned about. In really remote parts of Scotland, for example, consumers do not have a choice or have a very limited choice. In times of short supply, do those choices still exist if one supplier cannot get hold of the product, and what are the implications for those consumers? We did not focus on the supply side. It was just about making sure that consumers have a choice.

Ms Louise Close (Competition and Markets Authority): We spoke to the Housing Executive, which has an oil scheme. That is an interesting concept, and I can send you more details on that work and the information that it provided to us on that.

That goes back to Juliette's point about how people hear about it. If you have more details on who the consumers are, you can target information about those schemes.

Mr Nesbitt: That data would be very interesting.

The Chairperson (Mr Brett): Agreed.

Ms McLaughlin: Good morning, and thank you very much for your presentation and your report, which is very interesting indeed. You have proposed a register of vulnerable households, given that over 500,000 households in Northern Ireland use oil. How do you envision that register being populated and kept current? Would that sit with the Consumer Council, perhaps, given that it already operates a price checker tool for reference? You have made a number of recommendations. Have you discussed those in detail with the Utility Regulator and got its thoughts?

Ms Enser: Your first question was about how to collect information about vulnerable consumers. Ultimately, part of what we recommend is that the Department and the regulator consider that as part of their response to the report. We anticipate, or certainly expect, that that will build on existing schemes for other types of utility, for example, to identify vulnerable consumers. How that is done, however, is a question for the Department.

In answer to your second question, we engaged with a range of stakeholders throughout the study, including on the government side, and we continue to do so. In general terms, when we do this kind of work, we do not stop when we have issued our recommendations. In particular, we work with those bodies where we have made a recommendation in order to make sure that we can support them with the information that we have gathered. I do not know whether there is anything more specific that we can say about the discussions that we have had.

Mr Steadman: I do not think so, other than to confirm Juliette's point that we had a lot of engagement with all of the Northern Ireland stakeholders, just to understand different perspectives on all of the issues.

I have one further point on the topic of vulnerable consumers and how that register might work. At the moment, for on-grid consumers, there are systems whereby the regulated companies can be obliged, essentially, to seek information from households as to whether they should be considered vulnerable. When it comes to heating oil, the difference that we have observed is that you do not have the same contracted relationships, so there is not necessarily an ongoing relationship of six months, a year or longer. There are different challenges in saying, "OK, this company is responsible for identifying vulnerable consumers in this area". However, we think that there could be potential for the Utility Regulator to leverage those other sources of information on vulnerability regarding on-grid energy consumers for use with heating oil consumers. However, the detail of exactly how that would work would need to be fleshed out with the relevant parties.

The Chairperson (Mr Brett): Sinéad, do you want to follow up on that?

Ms McLaughlin: I have long been an advocate of having some type of register to identify those who are most vulnerable in our communities. Quite often, in the absence of that, when we are giving support to those who are experiencing high prices, we give it to everybody. So, millionaires and wealthy households get support when we should be providing even more support to the most vulnerable.

I am really interested in that vulnerability register, which would be targeted at those who need support the most. As a Government, we should be doing that anyway.

The Chairperson (Mr Brett): I have a difficulty with the recommendation that you have made. There is a unique circumstance in Northern Ireland, in that we have countless suppliers of oil, a lot of which are small and medium businesses in rural communities. Are you saying that suppliers across Northern Ireland would have to either maintain or have access to that register? It is much easier with electricity: because we have two or three main suppliers, that could be done through Northern Ireland Electricity (NIE), which, ultimately, is an Irish state-owned organisation. I struggle to see how what you have recommended, which is the creation of a register of vulnerable customers in Northern Ireland, would operate.

Mr Steadman: As we said, the question about exactly how it would operate is something —.

The Chairperson (Mr Brett): It is a bit disingenuous to make a recommendation, present it to the Committee and then say, "We've made this recommendation, but we've no idea how you're going to do it; it's a matter for the Government". Ultimately, you are here to give us evidence and your view. Saying simply that is for the Executive to flesh out does not really assist us in the work that we are trying to do.

Ms Close: I think that the report mentions the Utility Regulator's customer care register, which it is currently developing, as one concept of how that could be developed, but, as Juliette mentioned, there could be others. As you mentioned, Sinéad, CCNI already has responsibility in the area of home heating oil. We looked at the concept of its looking at a vulnerable register for water, electricity and gas. Through our discussions, we looked at the possibility of using that as a mechanism to identify people who might be on that list because they are gas customers, but, again, there could be other ways of doing that, which the Department could investigate.

Ms Enser: That is what I was talking about: potentially building on protections that are already there for other network industries. The thing that makes you a vulnerable water customer, for example, will probably make you a vulnerable energy customer. Perhaps it is possible to build on information that you find about other —.

The Chairperson (Mr Brett): The point that I am making is that Northern Ireland's water supplier is one supplier, so it can access that. If we have, say, 200 oil companies, how are they going to access that register? That is the difficulty. When we make recommendations, we need to think about the unique circumstances here in Northern Ireland.

Mr Delargy: Thanks for your presentation. It is particularly timely today, given that customers in some of the most vulnerable circumstances are now able to apply for £100. Obviously, that is only a small step when it comes to what needs to happen and the broader picture here.

A lot of points have been covered. We talked at length yesterday in the Chamber about how some of us in the Committee love statistics and data. I want to go into that data and those statistics a wee bit today. You talked about the distributor price increase of 11%. It has been said that that is a smaller figure than it might have been. I tend to disagree; a hike of 11% going on to people's bills at this time is a substantial increase. We have been told time and again that distributors have not benefited from the price rise internationally. That figure really concerns me, because it is being passed on to households. I want to go into that first.

The broader point is about regulation. Declan mentioned the price cap, which you have not included as part of your recommendations. I am interested in understanding the statistical modelling that you did on that. How did you come to that decision? Is there any advance on that?

Mr Steadman: At the risk of repeating Juliette's point earlier, let me say that we start the analysis of the price cap from the point of the big spike in heating oil prices, which is when consumers ended up having to pay upwards of £700 for 500 litres of oil. We start by looking at how much of that was due to margin inflation at retail level. It comes to about £20.

Mr Delargy: I will stop you there for two seconds. I appreciate that, but I will clarify my question: what modelling do you use? I appreciate that you do it, but I want to understand how that figure is arrived at. What data do you use in that process? How is that process done, from start to finish? I want to know not just the conclusion that you have arrived at but how you got there and what method you used to do so.

Mr Steadman: The data used to gather that information was, essentially, distributors' financial records. We collated evidence from Northern Ireland and distributors based throughout the rest of the UK to understand exactly what their cost base changes had been. That is how we came to the average figures. We looked at their change in wholesale input cost, their change in operating costs and their change in any aspect of their business. Understanding how their volumes have changed is also an important part of understanding exactly how much they are making during this kind of crisis. I totally appreciate the point about the £20 adding to the price that is being paid by consumers, but the challenge for us is observing. We can see that that happened and that it was temporary. The challenge for us is to try to think about what would be a proportionate response. Would a system of price regulation do enough? It might take £20 off a £700 bill, but there are risks associated with it. If you put a price cap in place and set it at a level that disincentivises suppliers from supplying to more remote regions where it costs more to supply, you have created a problem that is potentially bigger than the one that you have been trying to solve, because now those people cannot access heating oil at all. It is those types of trade-offs that we were thinking about when considering what the right response would be. I totally take the point: obviously, we would rather see no increase and nothing more than necessary being added to consumers' bills.

Mr Delargy: I appreciate that. I will go back to the Chair's point about the number of oil suppliers and distributors that we have here. We are uniquely placed, in that there are a lot of suppliers all around the North. They are in a lot of villages, towns and communities. I am not totally convinced that the rurality issue would be such a problem. There are more suppliers based in towns and villages here than there are in other regions, so I am not totally convinced by that point.

We hear that a cap might take only £20 off a £700 bill, but £20 is what puts food on a lot of tables now. People are making choices between food and heat. I am certainly not convinced that not examining that is the right thing to do. I recognise that there are risks associated with it, but I ask that the Committee be presented with the data on how the decisions have been reached. I appreciate the presentation, and I appreciate that you are experts in your field, so I am not challenging your professionalism, but we need to know that all options have been explored, how decisions have been arrived at and that those decisions take cognisance of our unique position here in the North. I would like more in-depth statistics to be presented to the Committee as soon as possible, because that data will be the enabler of our giving proper scrutiny to the issue.

I thank you for your presentation. It has been useful, and it makes a lot of points, but I am yet to be convinced on the point that I have raised.

Mr Honeyford: Thank you for coming in. It is a really useful discussion. Can we put up the graph of the wholesale cost movements? Some of the language is confusing. We talk about the wholesaler, but the public need to understand the process. A lot of it is foggy, and people do not understand the movement of the money. On the graph that deals with wholesale cost movements, we are talking about the unit at the docks with the oil in it. I buy my oil from the distributor, and I am the householder. The householder buys from the distributor. The distributor does not carry stock; the wholesaler carries stock.

On the next slide, the graph is difficult to see, but which line relates to the wholesaler's costs?

Mr Steadman: It is difficult to see, but I do not think that the green line shows the price at which the wholesaler is selling to the distributor. The gap is, essentially, the gross margin that the distributor is making.

Mr Honeyford: The second line from the top is the price that the homes in my area and everybody else's area are paying on average in Northern Ireland. If we look at that graph, what we see is the suspicion that we all have, which is that the price to the homeowner instantly goes up compared with the cost at which they are buying the oil from the distributor; the percentage is instantly greater to the homeowner rather than to the distributor and the wholesaler.

Mr Steadman: Yes, you are right, and that fed into the point that, initially, the margin temporarily went up slightly. As the graph progresses, you then see that the lines come closer together again.

Mr Honeyford: But there are three months in between. When oil prices are at their peak and are on the news, everybody becomes very knowledgeable about the price of oil. It becomes less of an issue as it comes down, but there is an initial gap there of three months.

Mr Steadman: I cannot see the axis on that.

Ms Enser: It gets bigger and smaller throughout that three-month period, but it is worth saying that — Geoff, correct me if I am wrong — that is the gross margin. The green line is the amount that the distributors pay to buy the fuel, but that is obviously not their only cost. They also pay for the cost of distribution.

Mr Honeyford: So, did the cost of distribution go up in that week?

Mr Steadman: We found that the operating costs went up 6%. In that period, when prices increased by £200 or something of that order, we found that 83% was the wholesale cost, 6% was operating cost increases, and then you were left with that 11% margin. For example, their input fuel costs were going up in that period, which feeds into the operating costs line. It is not that all of that gap is —.

Mr Honeyford: In the week from 5 March to 12 March, explain to me how the operating costs went up by that percentage.

Mr Steadman: They do not explain all the difference. There was an increase in distributor margin of 10%, so there was a figure of around £20 on the £200 increase. We found that that was temporary and that, in the latter periods of the study, once you were into May, margins declined again and went back to pre-existing levels. Those are our findings. I recognise that there is a debate about what you do about that. The weakening of competition that I mentioned is the kind of thing that caused the margin increase. You have the coincidence of lots more people trying to buy fuel than is ordinarily the case, because they want to get ahead of the feared price spike, but you also have a situation where suppliers are struggling to get hold of fuel. It is the classic demand and supply issue that weakens competition. In that period, there is also a situation where the distributors face real uncertainty about their oil orders, thinking, "OK. I am going to get an order on this day. The next day I am going to supply oil. I am really unsure what price I am going to face by the time that I collect". Some of them buy on the spot, literally on the day. There is huge uncertainty for them about pricing to make sure that the business is profitable. That is another issue that suppliers are contending with.

Mr Honeyford: I get that.

Mr Steadman: It all feeds into what we see.

Mr Honeyford: You can look at the figures for May of the previous year, when people are not buying as much heating oil as they do in September, October or November, and I understand that. The graph shows the suspicion that there is a rocket and a feather, which means that the public are instantly paying prices that have gone through the roof for home heating oil, and the price does not come down over time as, we can see, the wholesale price comes down. Has the CMA done any work to see how that can be passed on to protect homeowners?

Mr Steadman: The rocket and feather question is one that we wanted to look at to understand whether there is profiteering. That is, essentially, the analysis that you can see. You can see in the later stages of the graph that, by the end of the period of the study, margins have returned to normal levels and, in some periods, they are slightly negative. We come back to that question: if you have periods of temporary increases, what is the right response? We then come back to the question about whether it is proportionate to regulate prices as a response. We have come to the conclusion that it is challenging and difficult to do that where everybody has different cost bases, the prices change so quickly, and you could disincentivise people from supplying to more expensive areas. That is where we have come to on that. We completely recognise the concern that it leads to a temporary margin inflation. For us, it is a question of the right response to that.

Mr Honeyford: Finally, you mentioned giving powers to the Utility Regulator. What difference would those powers make to the graph, if that situation happened again?

Mr Steadman: On the fundamentals of whether there would still be a price spike if it happened again, where that is to do with the changes in input costs, the price spike will not be avoided through what we recommend. The kind of things that we are recommending that, we think, could help consumers are around trying to give them greater visibility on whether they can buy small volumes or use payment plans to avoid having to pay for a huge amount of oil at one point. It is about making sure that there is as much transparency as possible around who has oil and what their options are and that they understand the best deals at a given point in time. We are trying to help consumers to navigate the market during that difficult time. However, given that they are macroeconomic factors, we cannot pretend that we can stop that kind of input price shock.

Mr Honeyford: Thank you.

Ms Forsythe: Thank you very much for your presentation. I saw in the press the CMA intervention case to help consumers get compensation for the increased cost of their oil due to the price hike caused by the circumstances in the Middle East. People were quoted a price for oil, which was then significantly higher on delivery. Obviously, that was a UK-wide case. Do you expect to see a number of consumers in Northern Ireland being able to avail themselves of that compensation? Where should consumers here go if they were hit with higher prices and are out of pocket because of the price hike in their oil quotes?

Ms Enser: Thank you for the question. As I said in my presentation, we did some consumer protection work because we had heard specifically about issues with consumers having existing orders cancelled and them having to then, for example, reorder at a higher price. We announced a voluntary compensation scheme for some customers whom we found to have been affected by that, potentially in breach of contract. That covers suppliers in England, Wales and Northern Ireland and relates to purchases through a specific platform. The customers who are covered by the scheme are being contacted directly, so they do not need to do anything. If you are eligible for the scheme, you will be contacted.

Ms Forsythe: How do you know who is eligible? Are there potentially consumers in Northern Ireland who were quoted an oil price, got oil delivered and are out of pocket because the price was different? If they see that in the press and could potentially be eligible for compensation, is there not an opportunity for them to apply for this? I am just trying to understand.

Ms Enser: We looked at contracts that were made through a particular platform, and we were concerned that there may have been a breach of contract. We have been able to identify the customers who made those purchases through the information from the suppliers. They were able to identify those customers, even if we could not. I am not closely involved in that work, so I do not know whether we or the suppliers are doing the identification, but, essentially, we can identify the group of customers who are covered by the scheme. That is how they can be contacted.

Ms Forsythe: Are you able to share that information with the Committee? I do not feel totally convinced that there are not people out there who have been caught in the web of paying too much for their oil during that period. It is not necessarily in the interests of those who are selling the oil to identify those people. I am a bit worried that consumers could be entitled to compensation but are not getting it. If Committee members, as constituency MLAs, could potentially help to raise awareness about that, that would be very helpful.

I represent South Down, which is a border constituency. In your report or any of your work, have you done any assessment of the extent of oil imports from the Republic of Ireland to consumers here?

Mr Steadman: No, we did not focus on that.

The Chairperson (Mr Brett): On behalf of the Committee, thank you very much. We will follow up by asking for some information. Should the Committee decide to take forward any of the recommendations, we will definitely be in touch. Thank you so much for your work. We really appreciate it.