Energy firms 'getting free loans'

Regulator Ofgem has been looking into some customers' concerns

A consumer group has raised fresh concerns over direct debit demands by energy companies ahead of the regulator's findings on the issue.

Some 13% of customers were £100 or more in credit on their gas or electricity bills, according to a poll by the consumers' association Which?

It claimed companies were getting "free loans" from customers as monthly demands were too high.

The energy regulator Ofgem will report soon following a review of complaints.

Satisfaction?

Which? said that customers paying by direct debit were in credit by an average of £74 for electricity and £84 for gas.

OMBUDSMAN CASES Billing: 91% Transfers: 8% Sales: 1% Source: Energy Ombudsman 2007-8 Battling bills - what help is there?

Direct debits being set too high was the most common complaint about energy providers in the latest Which? survey about customer satisfaction.

"It seems incredible that energy companies can take hundreds of pounds more than they need to from their customers, and profit from the interest that this money will earn at our expense," said Martyn Hocking, editor of Which? Money.

"While a small amount of credit built up over the summer months can be used up during the winter, it is difficult to see how a £200 credit will be used up - particularly as the customer makes the same payment each month."

Millions of people pay their energy bills by direct debit, but may be unclear about the correct level of direct debit to ensure they clear their tariff each month.

Energy companies' representatives have consistently said that suppliers try to get account balances as close to zero as possible.

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Garry Felgate, chief executive of the Energy Retail Association, said: "There will be periods when a customer is in debit, effectively receiving a loan at that time, and there will be corresponding periods when they are in credit to their supplier.

"Customers who pay for their energy by direct debit choose to do so because it helps them to budget effectively for their energy use throughout the year.

"If you are a direct debit customer and you are at all concerned about your payments, you should take a meter reading and speak to your energy company without delay. They will be happy to discuss your concerns with you and can organise a refund if appropriate."

Regulator's review

Concerns on the issue were raised with the regulator by Conservative MP and chairman of the Business and Enterprise Select Committee Peter Luff. He claimed the practice might be widespread.

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He directed a batch of complaints from individual consumers to Ofgem. A spokesman for the regulator said that these views had been analysed and companies had been asked for details on arrangements.

"We are expecting to publish a report quite soon," he said.

The regulator can order energy companies to change their behaviour over billing, or can bring in a new licensing condition that could lead to companies being fined if direct debit levels were not justified.

Ofgem suggested that customers should go to their supplier with any concerns over direct debit levels.

The company then has a statutory eight weeks to investigate. If it fails to do so, or the customer is not satisfied with the outcome, the case can go to the Energy Ombudsman.

This referee then takes an independent look at the facts and can award compensation where appropriate.

A spokeswoman for the Ombudsman said that complaints tended to be seasonal, with more gripes relating to winter bills.

Although there are no specific figures on the number of complaints about this issue, some 91% of cases raised with the Ombudsman in 2007-8 were about billing, 8% were about transfers and 1% about sales.