MP criticises energy firm charges

The big six energy providers all raised prices twice this year

A senior MP has said he believes energy companies are boosting their cash flow by increasing customers' direct debit payments even when they are in credit.

Conservative Peter Luff, chairman of the business and enterprise select committee, is calling on the energy regulator Ofgem to launch an inquiry.

Energy suppliers have denied profiting by increasing direct debit payments.

The trade body, the Energy Retail Association, said companies were acting in customers' best interests.

Millions of people pay their gas and electricity bills by direct debit but two price rises this year alone mean many consumers are unclear how much they should be paying each month to ensure they clear the amount due on their bills.

There will be people in fuel poverty who are paying by direct debit who can't afford these huge increases Peter Luff MP

'Balanced accounts'

Mr Luff, MP for Mid Worcestershire, believes firms have been raising direct debit payments even when customers' accounts are in credit and warns this practice may be widespread.

"There's a real temptation for the companies to boost their cash flow at a time of economic recession," he said.

"I think things are getting worse and there will be people in fuel poverty who are paying by direct debit who can't afford these huge increases.

"So I think Ofgem need to investigate urgently to see if they think this is correct - that the fuel companies are using this quite a lot. And we need to do something about it."

He told the BBC that the only way round this is to introduce so-called "smart" meters, which offer real-time information on gas and electricity use and produce more accurate bills.

The consumer organisation Which? believes that fuel companies could have already earned as much as £660m from customers paying too much in direct debits.

But the Energy Retail Association strongly denies this.

"This is absolutely not the case," said Russell Hamblin-Boone from the trade body.

"What energy companies are trying to do is make sure you get a balanced account that is zero or as close to zero as possible after you've had the biggest bill," he added.

Ofgem said it has not received any evidence of the misuse of the direct debit scheme.