Page last updated at 16:58 GMT, Saturday, 28 November 2009

Prepay energy meters 'still overcharging customers'

Gas hob
EDF was the only company to escape criticism from the housing body

Five of the big six energy suppliers still overcharge customers using pre-pay meters, despite new Ofgem rules, the National Housing Federation says.

Since September, differences in charges must reflect the costs to companies.

Ofgem has estimated that annual service costs are £88 higher for pre-pay customers than those on direct debits.

The NHF says Scottish Power, British Gas, Npower, Scottish & Southern and E.On all charge more than this. Energy retailers denied breaching the rules.

The retailers' organisation, the Energy Retailers' Association, said the new rules were not a price control capping the difference in charges to prepay customers at a particular figure.

Ofgem said it would investigate any objective evidence of overcharging.

It says its new rules have already cut energy bills by £96m.

'Absolute disgrace'

Following a major investigation last year, the regulator found that "service costs for pre-payment meter customers are £88 per customer higher than for a direct debit customer".

But the NHF, which represents 1,200 housing associations in England, claims that Scottish Power, British Gas, Npower, Scottish & Southern and E.On were all charging more than this when the rules were brought in.

It says that in September pre-pay customers at the five firms all paid significantly more than those paying via direct debit, ranging from those at E.On who were charged £99 more, to those at Scottish Power who paid £108 more.

EDF was the only one of the major companies that the NHF says did not overcharge.

We dispute the National Housing Federation's claims that some suppliers have breached licence conditions
Energy Retail Association

NHF chief executive David Orr has written to Ofgem, demanding an investigation into whether firms had breached their licence conditions.

"Ofgem will now have lost the confidence of millions of pre-pay customers across the country," he said. "The situation is an absolute disgrace."

A spokesman for Ofgem said: "It is a fact that price differences between pre-pay meters and other payment types have fallen sharply.

"We will continue to monitor suppliers' compliance with the licence conditions and if differentials cannot be objectively justified we will investigate."

Reflective costs

The Energy Retail Association (ERA) said its members were not infringing their licence conditions.

A spokeswoman said the principle of a fair reflection required by the licensing agreement did not specifically state a cap of £88 as the maximum difference allowed between pre-payment meters and direct debit.

She said pre-payment meters inherently incur a higher cost due to the infrastructure they require.

"Ofgem has put in place rules that make sure all customers - not just those on pre-payment meters - are charged fairly according to what it costs suppliers to provide them with their energy," the ERA said in a statement.

"This is not a price control as the NHF suggests."

BBC business correspondent Joe Lynam said estimated gas and electricity bills and inaccurate readings have made energy bills an inaccurate science.

Until smart meters - which allow a two-way flow of energy information between users and providers - are rolled out across the country, energy bills will continue to be contentious, he added.

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