Finance

Energy firms hoard £2bn of customers’ cash

Energy firms hoard £2bn of customers’ cash
Written by MAGASIR

There are no rules preventing companies from using customers’ cash to keep their businesses running. In November, Ofgem said it thinks “allowing suppliers to use some of their customer credit balances for innovation, operating cash and hedging but not for riskier spending, like funding unsustainable growth, is the right balance”.

However, the Oxera report – which examined how well Ofgem is regulating the energy market – found that many of the energy firms that have collapsed since last summer relied on customer credit balances to fuel growth.

Several, including Avro and Utility Point, were so dependent on the money customers paid in advance that at points it accounted for more than 80 per cent of the firms’ total assets.

Ofgem has now said firms must raise the alarm if customer credit balances account for more than half of their total assets – the point at which they are seen to be overstretched.

None of the companies whose credit balances are disclosed in this article exceeded this threshold.

The credit that British households build up with energy firms is protected if the firms collapse, but the cost of these failures is added to the energy bills of all British households.

The collapse of 28 firms is predicted to have added £2.7 billion to UK energy bills – the equivalent of £94 per customer. It has also cost the taxpayer £6.5 billion to bail out Bulb.

A spokesperson for Ofgem said it consulted widely on its reforms, which strike “the balance between improving the energy retail sector’s resilience, keeping costs down for customers and encouraging innovation as we transition to home-grown cheaper energy”.

It added: “Much of the feedback and analysis concluded that completely ringfencing credit balances would remove a large piece of working capital that would keep prices down for customers. Customers can still request their credit balance back from their supplier at any given time.”

Octopus and Ovo said customers owe them more money than they owe to customers, and that those in credit can withdraw their funds at any point.

A spokesperson for EDF said that the company did not “use credit balances to fund our business growth” and that the regulator had recently concluded there “were ‘no significant issues’ with the way it manages its customers’ direct debit calculations”.


Energy firms ‘have complete control and are earning interest on my money’

When Stacey Dickens saw her energy direct debit had risen to £500 a month, her first reaction was panic.

Despite it being winter, the business executive still has not turned on the central heating and has been using hot water bottles and a fire to keep warm.

Her house in Skipton, north Yorkshire, is old and drafty, so throughout autumn she had been taking steps to keep her consumption down – or so she thought, until she saw money being taken from her bank account at the end of November.

But when she contacted her supplier EDF, the situation became more confusing. Ms Dickens discovered she was more than £2,300 in credit – almost the same amount as the current energy cap, which is supposed to equate to the average annual bill. , had her monthly direct debit gone up again from £300 a month to more than £500?

The customer service agent replied that prices had risen and asked for a reading, which she was unable to provide because she was calling from her parents’ house.

She told them the bill increase did not make any sense, given that she effectively had many months usage in her account. But the company would not reconsider, instead telling her she should get a smart meter, which increased her frustration further.

“They’ve got all these recorded messages about turning off the lights, closing the doors, have a shorter shower,” she told The Telegraph.

“I’m doing all of that, but it’s not making no difference whatever because they are not basing the bill on how much I use but a forecast that is ridiculously out. I asked them to give the credit back, but they weren’t receptive at all”, said the 41-year-old.

After being contacted by The Telegraph, the company apologized and lowered her payments to £200 a month.

A spokespersonsman said: “We’re sorry that estimated meter readings were used instead of Ms Dickens’ actual meter readings, which led to a further direct debit increase. We have now corrected this and have contacted Ms Dickens to say sorry, and to arrange setting her monthly payments at the right amount.”

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MAGASIR

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