Watchdog wants tougher regulation of heating oil market

Stormont should apply stricter consumer protection regulations to home heating oil suppliers, the UK's competition watchdog has recommended.

The Competition and Markets Authority (CMA) has been investigating the heating oil market in Northern Ireland and other parts of the UK.

It found that the huge spike in prices at the start of the Iran conflict largely reflected rising wholesale costs and that the market is generally competitive.

However it concluded that oil consumers are not as well protected as those connected to the gas and electricity grids.

The CMA is not recommending the sort of price controls applied to the gas and electricity markets.

Instead it has suggested a "new, proportionate regulatory regime" which largely involves giving consumers clearer information.

The key recommendations are:

• Require suppliers to register and meet minimum standards, including how prices are quoted and order cancellations are managed.

• Require suppliers to clearly signpost available payment plans and minimum purchase volumes

• Create a register for vulnerable households to make it easier to protect them

Sarah Cardell, Chief Executive of the CMA, said that while the home heating oil market is generally competitive, that is "not enough to ensure good outcomes for all".

"Stronger safeguards are needed – including regulatory oversight and better support for vulnerable consumers as well as communities living in areas of the UK that are particularly exposed to higher and more volatile prices," she added.

Around two thirds of Northern Ireland households use home heating oil, by far the highest of any UK region.

At the start of the United States and Iran conflict in March, heating oil prices in Northern Ireland rose by a record monthly rate of 92%.

That compared to the previous largest spike of 59% in March 2022, after the Russian invasion of Ukraine.

Analysis by the CMA suggested that prices rose even more steeply in Scotland and Wales, where heating oil is typically used in remote rural areas.

It found that prices tend to lower in NI overall as it has a competitive range of suppliers and a market which is big enough to minimise delivery costs.

The CMA also praised the daily price checker tool develop by the NI Consumer Council and says the Scottish government should consider a similar service.

Alongside its market study, the CMA has been investigating complaints that some suppliers may have breached their contracts when they cancelled customer orders at the start of the conflict as prices were rising steeply.

When wholesale prices surged, some suppliers chose to cancel lower-priced pending orders and required customers to re-order at the new, higher rates.

CMA analysis shows that around 1,700 customers across the UK were affected by possible breaches of contract.

Whilst those people received refunds for their original order, many had to re-order at significantly higher prices or go without fuel.

As a result, some people may have had to pay between £150-£350 more for their heating oil order.

Following CMA engagement some suppliers have agreed to compensate affected consumers but others have not.

Sarah Cardell said the CMA was "pressing" the holdout firms to pay compensation and is "preparing to take enforcement action if they don't".

David Blevings from the NI Oil Federation described the report as "very good news for local home heating oil distributors".

He said it showed the market in Northern Ireland was competitive and the local oil industry was in "very strong and very good shape".

"Northern Ireland consumers buy their heating oil cheaper than the UK average and up to 15% cheaper than the Republic of Ireland's cost of home heating oil," he said.

"We have more than 200 distributors competing on a daily basis for that business and I think the CMA has recognised that in the report."

Blevings said the NI Oil Federation already had a code of conduct, but if it "needs beefed up or improved", then it would be happy to look at that.

Stormont's Economy Minister Caoimhe Archibald welcomed the report and said the department would continue to engage with the CMA as work progresses.

"I will consider the CMA's recommendations carefully to ensure any action is proportionate, evidence-based and tailored to the north's specific market and regulatory circumstances," she said.