Ofgem orders energy firms to take action over unfair direct debits

·Finance Reporter, Yahoo Finance UK
·3-min read
Ofgem  File photo dated 08/04/19 of a handheld smart meter in a London home. Householders are experiencing plummeting standards of customer service from their energy suppliers including rising call waiting times as their bills soar, according to Citizens Advice figures. Issue date: Friday April 8, 2022.
Ofgem said some costumers saw their direct debits jump by over 100%. Photo: PA

Energy regulator Ofgem has found a range of weaknesses or failings in the way energy suppliers charge direct debits that could leave costumers overpaying.

Weaknesses ranged from inadequate processes and weak governance and controls, to “an overall lack of a structured approach to setting customer direct debits”.

Ofgem said it was concerned that in some cases this could lead to customer direct debits being set incorrectly, or not being evaluated for a long time, which can cause the build-up of either unnecessarily large credit balances or debt, depending on whether the customer is under or overpaying.

The energy regulator found out of 17 large suppliers, five had "moderate or severe" weaknesses.

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The regulator identified Ecotricity, Good Energy, Green Energy UK and Utilita Energy as suppliers with “moderate to severe weaknesses”.

Ofgem will also now require all suppliers that increased customers' direct debits by over 100% – impacting more than 500,000 households – to review them.

More than 7 million customers had their monthly direct debits increased by an average 62% between February and April.

It comes amid mounting concern over soaring energy costs, with annual bills expected to climb above £3,000 when the price cap is increased in October.

Ofgem said that more than seven million energy consumers on a standard variable tariff (SVT) saw an increase in their direct debit between February and April 2022.

The energy regulator said that on average, direct debit levels for customers on an SVT increased by 62% this period, mostly reflecting the increased cost of gas.

Around 8% of SVT customers saw a rise of more than 100%, with the regulator saying it is "concerned by this and wants to ensure there is good reason for it".

Energy suppliers will have to submit action plans within just two weeks to set out how they will take the needed actions.

Ofgem will then look over the action plans to assess their effectiveness and comprehensiveness.

Ofgem chief executive Jonathan Brearley said: “We know how hard it is for energy customers at the moment, so it’s crucial that the amount they pay each month in direct debits is right so they can manage their money.

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“Suppliers must do all they can, especially during the current gas crisis, to support customers and to recognise the significant worry and concern increased direct debits can cause.

“We know there is some excellent service out there, but we want to make sure that it’s consistent and standard across the board. It’s clear from today’s findings on direct debits that there are areas of the market where customers are simply not getting the service they need and rightly expect in these very difficult times.

“Today’s findings show that with the urgent changes we are now expecting, the current system will be much fairer for consumers. Bringing down the price of gas is not in Ofgem’s control; however, we will do all we can to have a fair system and ensure suppliers look after their customers.”

The regulator said there were no major concerns over direct debit operations at British Gas, EDF, ScottishPower and SO Energy.

Those found to have minor weaknesses consisted of Bulb, E.ON, Octopus Energy, Outfox the Market, Ovo, Shell and Utility Warehouse.

Watch: Why are gas prices rising

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