As we reported on Monday, energy companies are hoarding nearly £2 billion of their customers’ money through direct debit payments. Some users may be content to maintain large balances with their gas or electricity supplier to ensure their bills are covered as prices continue to rise. But for many, these sums being held back represent a sizeable chunk of income that they could do with as the cost of living crisis deepens. Moreover, energy companies are raising the direct debit payments even on accounts already over a thousand pounds in credit.
Critics say this is becoming a form of cheap borrowing for the businesses. There certainly seems to be something amiss when customers with significant sums already accumulated should have their direct debits raised, in some cases with no choice in the matter, although the companies say this is not the case.
Some companies operate refund schemes to avoid the credit balance becoming too high but best practice may not be followed throughout the industry. It is the job of Ofgem to keep an eye on this yet it has been found wanting. Christine Farnish, a former board member of Ofgem, told this newspaper that the regulator needs to step in. “Energy firms are allowed to put their metaphorical hand into a customer’s pocket and use advance customer payments to fund their own businesses,” she said.
It is, of course, possible to pay for fuel as it is purchased, but many companies insist on direct debit arrangements being set up. Indeed, they can be useful for customers who do not have to worry about settling regular bills. But they should never be abused. Certainly, Ofgem should take a far more rigorous stand on this matter.
Tougher Ofgem scrutiny is needed
It is the job of the energy regulator to keep an eye on these matters, and yet it has been found wanting