Investigations against energy companies over increasing direct debits for millions of customers

Ofgem said there were “worrying signs” that some companies had increased household debits by unjustified amounts to offset a price cap increase

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Some of the country’s biggest energy companies are to be investigated over claims that they overcharged customers after a price cap hike.

Ofgem, the market regulator, said there had been “worrying signs” that some businesses had increased household direct debits by more than needed to cover a £693 increase in average bills.

Suppliers are allowed to charge monthly fees, but these must reflect household consumption and you must be given advance notice – usually at least 10 days before the increase.

Customers can dispute this amount or submit an accurate meter reading to ensure the increase is linked to their actual usage.

Ofgem also said some companies may have referred customers to rates that are not in their best interests.

Some companies may also have referred customers to tariffs that are not in their best interest, Ofgem said


Tolga Akmen/Getty)

Charging customers more than necessary allows suppliers to set up a cash safety net should wholesale prices rise again in the wake of the Ukraine crisis. The practice is prohibited because it is unfair to the consumer.

Ofgem is now launching a series of checks to assess whether energy traders comply with these rules.

Jonathan Brearley, Chief Executive of the Watchdog, said: “In investigating the gas crisis, we found that one of the main causes of the failure of many of these vendors who have exited the market is related to the way they manage the money paid got them from customers.

Has your direct debit suddenly skyrocketed? Let us know:

More than 4 million customers have been switched to alternative utilities after 30 suppliers went bust


(Getty Images/iStockphoto)

“This is money earmarked to pay for energy or raised to support broader renewable energy development.

“However, some suppliers have used these credits to shore up their finances, allowing them to pursue riskier business models with less financial resilience and greater likelihood of default. If that supplier goes bankrupt, the cost of replacing those balances will have to be borne by other suppliers and ultimately all energy consumers.”

Next week the Business Select Committee will question some of the UK’s largest suppliers on how they are handling the energy crisis.

Concerns include some companies encouraging customers to sign up for fixed-price deals that are more expensive than the cap.

The meeting will be attended by CEOs of E.ON, EDF, Scottish Power and British Gas owner Centrica.

Bulb and Avro bosses are also being questioned about their management before the companies collapsed last year.

Avro owed customers £90m and its failure is expected to cost consumers £700m.

Meanwhile, new figures released today show energy bills will remain well above £2,000 for two more years, despite Rishi Sunak’s £200 loan scheme.

Energy bills are expected to remain above £2,000 a year despite a £200 loan to ease the pressure on households this winter



Cornwall Insights, which predicted the recent 54% increase in the cap on average energy bills to £1,971, said it had increased its forecasts of upcoming changes to the cap set by energy regulator Ofgem.

It warned that higher prices for longer would undermine Sunak’s plan to ease the pressure on household finances by giving billpayers a controversial one-off £200 rebate on bills, repaid in £40 installments over five years.

Cornwall left its forecast for the coming winter unchanged, estimating that the price cap will hit £2,607, meaning household bills will double within a year.

While she expects the cap to drop from this record high, she doesn’t expect a significant drop any more.

The change comes after gas prices stopped falling sharply and started to stabilize, with risk now weighted towards further increases.

Craig Lowrey, Principal Adviser at Cornwall Insight said: “The exclusion of significant new energy efficiency policies from the energy security strategy was a missed opportunity. While the government has already offered consumers some help with paying their energy bills this year, that was before forecasts began predicting further increases and over a longer period of time.

“It is possible that the government will take further action in the autumn, but we have no guarantee that further support will be provided.

“Of course, many of the variables driving our forecasts may change before the deadlines for setting next year’s caps, but risk is currently weighted by upward rather than downward pressure on the price cap.

“And with the cost of living rising and inflation hitting a record high in March ahead of the March 1 cap hike,

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Fry Electronics Team

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