Energy firms face limit on direct debit overpayment amid soaring bills

·2-min read
Stock image  (PA Wire)
Stock image (PA Wire)

Ofgem has announced new measures to protect energy consumers’ money and ensure suppliers can withstand future shocks.

The energy regulator said that changes would stop electricity and gas suppliers from setting households’ direct debits too high.

This would prevent suppliers from using customers “like an interest free company credit card,” it said on Monday.

Announcing a new package of financial measures will help suppliers to “weather the ongoing storm” of challenges facing the industry, especially over autumn and winter, when the

Proposals include a tightening on the level of direct debits suppliers can charge customers.

Head of Ofgem, Jonathan Brearley, said the plans were “another step in making sure the complex energy market is fair, resilient and works for everyone”.

Acknowledging that the energy market “remains incredibly volatile” due to huge geopolitical issues, Mr Brearley said Ofgem was “working hard to ensure energy suppliers shore up their positions so they can weather the ongoing storm”.

A thermostat (PA Wire)
A thermostat (PA Wire)

He said: “By ensuring that suppliers are operating well-financed, sustainable, and have more resilient business models, we can avoid the supplier failures we saw last year which caused huge stress and worry and added costs to everyone’s bills.

“But if some do still fail, consumer credit balances and green levy/renewables payments will be protected.

“Currently they are used by some suppliers like an interest free company credit card.

“Moving forward, all suppliers will have to have enough working capital to run, without putting their customers’ credit balances at risk.”

Mr Brearley added that the measures would protect “customers’ hard-earned money” and ensure that the energy company foots the bill if it fails, “rather than consumers picking up the tab.”

An energy bill (PA Wire)
An energy bill (PA Wire)

Ofgem has said the changes will reduce the risk of suppliers going bust and protect the credit balances of energy customers if they do.

A safety net ensures customers are quickly moved to a new supplier with their credit balances intact if a supplier fails.

Gillian Cooper, of Citizens Advice, said: “Ofgem has previously allowed energy suppliers to run risky business models. As a result, it’s customers who’ve been left to foot the bill when companies collapse.

“We’re glad that Ofgem has listened to our warnings and is taking necessary steps to tackle some of the root causes of these issues.

“It must now ensure suppliers stick to these tougher standards so that people are better protected in the future.”

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