'No bill cuts' for cash customers

Energy suppliers say they are trying to keep bills down

Five of the UK's big six energy suppliers have no plans to reduce prices for customers who pay by cash or cheque, the BBC has learnt.

A change to the licensing system at the start of September said different prices could only reflect the costs that each supplier faced.

The suppliers say the higher prices for cash and cheque customers reflect the extra processing costs of bills.

But consumer groups worry that these customers are paying over the odds.

Savings

The new rules were regarded by some as an aim to reduce any price difference between paying by quarterly bills or direct debit.

Watchdog Consumer Focus says the average difference between the annual bill for direct debit customers and those paying quarterly bills is now £97, up 10% since April.

And now five of the big six suppliers - British Gas, E.On, Npower, Scottish Power and Scottish and Southern - say they have no plans to reduce their prices for cash and cheque customers.

What the companies are doing is when they're able to drive down costs, they're passing those savings on to the customers Garry Felgate, Energy Retail Association 'Unfair' energy bill ban proposed

Only EDF is considering price changes.

Garry Felgate, chief executive of the Energy Retail Association, which represents suppliers, said Ofgem was happy that their prices already reflected their costs, and the big six were trying to keep bills down.

"What the companies are doing is when they're able to drive down costs, they're passing those savings on to the customers," he said.

But Zoe McLeod, from Consumer Focus, said the new licence clearly stated that higher prices for quarterly bills could only be justified by the extra costs involved, and should not be used by companies to make extra profit.

"We do have concerns that despite the introduction of new licence conditions, consumers who pay by cash or cheque continue to pay over the odds," she said.

'Punitive'

According to Malcolm Keay, an expert at the Oxford Institute for Energy Studies, there is also a suspicion that higher prices for customers who do not use direct debits can be a punitive measure, designed to encourage them to switch their payment method.

A spokesman for Ofgem, the energy regulator, said it would be keeping a close watch on the situation and would take action if necessary.

Earlier this week E.On said that all new customers who paid by cash or cheque would be sent a bill every month rather than quarterly.

E.On said that the new system would make it easier for customers to budget, although one price comparison site said it could be seen as helping cash flow.

When asked whether this was a tactic to encourage greater take-up of direct debit, the E.On spokesman said that although this automatic form of payment was cheaper for the company, the move was designed to help customers manage their bills.