Energy suppliers’ sneaky payment hikes spark angry response from consumer groups
Energy suppliers are under mounting pressure to stop exploitative hikes in direct-debit payments in the wake of the energy regulator, Ofgem, launching a series of compliance reviews.
Consumer protection groups have today condemned the practice and called on Ofgem to do more to tackle energy firms that set payments higher than necessary.
Gillian Cooper, head of energy policy at Citizens Advice, said energy firms’ behaviour was “totally unacceptable”.
Cooper added: “There are normally justifiable reasons for an increase to your direct debit – such as building up credit for the winter – but your supplier should always be able to explain why this has happened.
“Unfortunately, in the past we have seen some energy companies shore up their finances at the expense of consumers. Ofgem must make sure suppliers only increase payments for valid reasons.”
The business secretary, Kwasi Kwarteng, said on Tuesday that suppliers would have three weeks to respond to the review. “Some energy suppliers have been increasing Direct Debits beyond what is required,” Kwarteng tweeted. “The regulator will not hesitate to swiftly enforce compliance, including issuing substantial fines.”
It is alleged, according to complaints, that energy suppliers have been raising direct-debit payments for consumers to improve their own cash flow. In doing so, consumers have found their payments being inflated, despite little change in their energy usage.
This comes after a 54% energy bill price increase came into effect in April, as Ofgem raised its price cap in response to the increasing cost of wholesale gas. European gas prices have soared in recent months, with sanctions on Russia being the latest factor contributing to the rising costs being felt by British consumers.
Normally, energy suppliers are required to inform consumers if they are changing the direct-debit payment that they take each month. However, reports revealing that customers are being charged more money, without an explanation from suppliers, suggest that suppliers are breaching the regulations.
Martin Lewis, the founder of financial consumer advice website Money Saving Expert, told the business select committee in March that he was “very concerned that a number of companies have been doing it to improve their own cash flow situation at the expense of their customers and would like to see the regulator crack down on that quite substantially.”
Lewis added: “The sheer volume of complaints I’m getting on that basis indicates to me this is systemic, market-wide rather than individual supplier led.”
Ofgem has given the suppliers three weeks to respond to their review and justify the vastly inflated charges.
An Ofgem spokesperson said: “Our top priority is to protect consumers and we recently wrote to suppliers to alert them that we are commissioning a series of market compliance reviews to ensure, amongst other things, that they are handling direct debits fairly, and that overall, they are held to higher standards for performance on customer service and protecting vulnerable customers.”
In April, Ofgem had indicated that compliance reviews were fast approaching, with the regulator’s chief executive, Jonathan Brearley, saying: “When households are facing massive increases in their energy bills, it is particularly important that suppliers are held to account and bad practices are addressed quickly.”
Citizens Advice recommends that ripped-off consumers still complain to their supplier: “Your supplier normally has to let you know about a payment increase at least 10 days before it happens – this is known as a ‘direct debit guarantee’,” it says, adding that if they fail to do this, consumers should ask for an explanation.
If energy suppliers are found to be in breach of regulations, Ofgem has vowed to “take tough and decisive action using the full range of regulatory tools at our disposal, including punitive measures if necessary.” Fines levied against suppliers could constitute as much as 10 per cent of turnover.