Energy suppliers have the heat turned on

March 26th, 2009 by admin | Filed under Daily News, Energy Prices.

Continuing claims of unfair overcharging is making UK energy suppliers feel hot under the collar. And the people who are making them roast are Ofgem, the UK energy regulator whose role it is to crack down on companies who vary from the tariffs that they are legally obliged to charge the consumer.

A recently code of practice providing a whole new list of conditions designed to protect the interest of consumers and members of the business community will protect against well know “gypping” practices initiated by energy companies, particularly price discrimination against customers in the lower income bracket. These can be either families or occasionally small, usually family run businesses that use prepayment meters to settle their energy bills in advance, instead of the methods preferred by energy suppliers, particularly direct debit.

Under the new legislation, Ofgem end to put a stop to unfair practices against those who prefer to prepay their energy accounts as well as putting a stop to energy company’s insistence on demanding the automatic rollover of fixed-term contracts, regarded as unfair practice,. Ofgem see it is the consumer’s right to be able to shop around for the best energy supply deal before deciding which energy supplier to opt for.

Currently, having prepayment meters installed results in the consumer being charged a fixed one-off fee of at least £90.00 when they sign up with an energy supplier, where direct debit customers are not required to place a deposit. The aim of Ofgem is to stipulate that energy suppliers will be allowed to charge a fixed sum, yet to be established, but considerably lower than that being paid now for this service.

Also under scrutiny are unfair practices being levied on the 12 million households who prefer to pay their energy bills by direct debit. It has long been the practice of energy companies to encourage their customers to pay by monthly direct debit by offering financial incentives, as being paid quarterly effects their cash flow considerably, by making it cheaper than paying quarterly. However, after considerable research was carried out by Ofgem, it was ascertained that as monthly amounts being charged to the customers was an estimate based on previous history and not after the physical reading of their meter, they were often being overcharged, and any inflated charges were not being refunded after the meter was physically read. In answer to claims by some energy companies that energy bills “leveled ” out over the year, Ofgem’s research showed that in many cases, consumers were paying for as much as 13% more for energy than they actually received, against those who paid quarterly after their meter reading was recorded.

In the long term, the new legislation will insist that energy companies will provide their clients with an annual statement, detailing tariff information, written price quotations as well as their clearly stated rights to switch energy suppliers without pre-conditions or penalty clauses.

Energy companies who fail to comply with the conditions of the new legislation, which is due to come into effect by the autumn of this year, run the risk of being reported to the Competition Commission.