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Energy companies under scrutiny for Direct Debit hikes

On 3 May the Business Secretary, Kwasi Kwarteng announced that Ofgem will undertake a series of “market compliance reviews”. These are to include a “stricter supervision of how direct debits are handled” by suppliers. The Government announced that some energy suppliers were hiking the prices of Direct Debits by more than is necessary. In some cases customers are seeing double or even triple their previous monthly payments.

Ofgem has given energy companies three weeks to explain what they have been/are doing or face punishment. In the first instance Ofgem prefers to work with companies to bring a resolution to issues. However, it does have the power to fine companies, according to Ofgem’s Compliance and Enforcement website page.

Kwarteng has said “The regulator will not hesitate to swiftly enforce compliance, including issuing substantial fines.” It would be good to see these companies fined and the money put back into the pockets of consumers!

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Ofgem chief speaks out

The energy price cap rose by 54% – or on average £700 – to £1,971 a year. They are expected to rise again in October.

Just two weeks after this rise, Ofgem’s chief executive, Jonathan Brearley, said the regulator was seeing “troubling signs” that some companies were allowing customer service levels to deteriorate, and that concerns were raised by consumers and consumer organisations that some energy companies “may have been increasing direct debit payments by more than is necessary, or directing customers to tariffs that may not be in their best interest”.

It would appear that energy companies are profiteering. Brearley has said that some suppliers have been using the extra money “to prop up their finances, enabling them to follow more risky business models”. He also said that “Customer credit balances should only be used to reconcile bills, not as a source of risk-free capital.”

Citizens Advice calls for action

Citizens Advice star rating research released on the 8 April 2022  showed that “energy suppliers’ customer service is the worst it’s been on average since 2017. It comes a week on from the rise in the energy price cap “. The research showed that time waiting on the phone and for responses to emails are on the increase.

If a consumer is struggling to pay their energy bills, suppliers are responsible for providing support, such as affordable payment plans. But Citizens Advice is concerned that “many could be missing out on help they’re entitled to because they’re unable to easily contact their supplier.”

The charity calls on Ofgem to “… introduce a ‘consumer duty’ to ensure suppliers provide a service specifically designed to meet the needs of all customers.” and adds that “A similar approach is being adopted by the Financial Conduct Authority to upgrade consumer protection. It should make companies directly responsible for the outcomes their customers experience. This includes making it easy to contact companies and get support when needed.”

The shocking customer service currently being provided adds to people’s worries about bills and demonstrates that energy companies are cutting corners and not investing in supporting consumers through this difficult time.

Check your  energy bills

It’s easy to check your bills. Look at your previous bills and estimate how much you would expect to pay with the 54% rise. If you think the new Direct Debit amount is excessive then write to your energy company and complain. Ask it to lower the Direct Debit amount to a figure that you provide and include your own calculation. Then keep an eye on your consumption, taking a reading each month, so you don’t get any nasty surprises further down the line.

To calculate your bill: Take the price of electricity or gas per unit (KW/h) divided by 100 and multiply that by the consumption of the energy used. Add the cost of the standing charge, as the number of days multiplied by the daily charge, then add the VAT, which for energy is currently 5%.

So for example:

1) Pence per KW/h/100 x consumption 18.5/100) x 315.5 + £58.37
2) Days x daily standing charge 63 x 0.223 + £14.05
3) Sub total = £72.42
4) VAT @ 5% + £  3.62
5) Grand Total = £76.04

 

If you have a day and night rate, also perform the same check for the night rate.

If you have both electricity and gas then repeat the check for your gas bill too.

Check the reading

If your supplier has used estimated readings for a long time, it could be that your bill is significantly wrong. Take accurate readings and submit them to your supplier.

Don’t pay the estimated bill. Instead, send correct readings to your supplier who will provide an accurate bill. It could work in your favour, as you may have paid too much and be in credit. But do remember it could also go the other way!

Check the Direct Debit

Your Direct Debit amount should be the same each month/quarter and your supplier must inform you if it will change. If it doesn’t inform you, you can complain to your bank under the Direct Debit guarantee. The bank should then put you back into the position you were before the increase.

 

With these simple checks you can ensure that you stay in control of your energy bills.

 

Further help with energy costs and issues

Electricity pylon Everything you need to know to complain about energy problems

 

More on energy All you need to know to make a complaint about energy

 

 

 

 

How to sort out gas and electricity problems without draining your energy: 20 tips from our Consumer Fightback column – lots of information in my This Is Money column

Help with your complaints

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If you need help with complaining effectively and making sure you are never fobbed off. GET THE BOOK! How To Complain: The ESSENTIAL Consumer Guide to Getting REFUNDS, Redress and RESULTS!

 

 

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Categories
Latest News Topical Utilities water and energy ways to save money

Ofgem tweaks energy rules – but will change bring down prices?

Ofgem is introducing new measures which may help to reduce bills for some energy consumers.

Ofgem makes changes to price tariffs options

Ofgem will introduce temporary measures from April 2022 which make all energy company price tariffs available to all customers. The result will be that existing customers and new customers will be able to get exactly the same deals. There will no longer be any preferential treatment for new energy customers.

power lines

The regulator said that the measures should help to protect energy consumers who face further rises in prices from April 2022, after it raised its cap on the most widely used energy tariffs by 54%. Suppliers must offer existing customers the same energy tariffs as new customers.

These measures will come into effect from April 2022 with the intention they will fall away this Autumn (end September) when Ofgem expects the risks they are protecting consumers from will be adequately addressed by proposed reforms to the price cap. The exact nature of these future price cap changes is not yet clear.

Is Ofgem doing enough to reduce bills for consumers?

The measures do not go far enough. Similar measures were put into place by the Financial Conduct Authority (FCA) for the insurance market in January of this year.

It is hard to understand why other regulators were not already following suit with the FCA’s action in the retail insurance market. These measures should have been in place and made permanent long ago. Ofgem says it will be watching the situation to see if the measures need to remain in place. Of course they should stay in place! Directors of energy firms are still making huge profits at the expense of consumers and this is simply not acceptable!

UK energy prices compared with France

France energy prices are increasing by just 4%, compared with 54% in the UK because of better regulation and a Government that is more willing to intervene in the market.

You have to ask, if the rise in energy prices is a global problem, then why it is not affecting us equally? Ofgem needs to do more to protect consumers, such as capping energy shareholders’ dividends!

Further help with energy and your rights

Electricity pylon Everything you need to know to complain about energy problems

How to save money on and complain about energy Various posts providing help on reducing bills and what to do if things go wrong

 

 

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Purchase and download Templates for complaining about utilities

 

 

 

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For masses of information, tips, guidance, laws and regulations and templates GET THE BOOK! How To Complain: The ESSENTIAL Consumer Guide to Getting REFUNDS, Redress and RESULTS!

 

 

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Want to get better at complaining? See 101 Habits of an Effective Complainer

 

 

 

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Save yourself time and effort finding the laws and wording a letter of complaint and download a template, fill in your details and get that redress