28th February 2014
The UK’s top energy firms have been ordered to pay back more than £400m owed to former customers writes Philip Scott.
Britain’s so-called ‘big six’ energy corporations including British Gas, npower, ScottishPower, EDF Energy, SSE and E.On according to the regulator Ofgem, owe more than £202m to previous customers, averaging about £58 each.
Credit left in accounts when people have changed suppliers or closed accounts has gathered dramatically over the past six years and Ofgem’s analysis shows an “unacceptably large” amount of money being retained rather than returned to consumers and a wide variation in company practices.
Around 3.5m household accounts and around 300,000 business accounts are affected according to the watchdog.
It said that with the recent rise in the number of consumers switching supplier, people need to be confident that they will not lose out if they close an account with their present supplier.
Ofgem now expects suppliers to do all they can to return money to individual consumers, and to tell consumers clearly what to do when closing an account. It asserted that where it is not possible to repay a balance, suppliers should find ways to use this money to benefit consumers more widely, and make clear to customers how much is held and why.
Its advice to consumers who believe they may still be owed money by a previous supplier is to contact the company directly and ask for it back.
Andrew Wright, interim chief executive of Ofgem, says: “When many people are struggling to make ends meet, it is vital that energy companies do the right thing and do all they can to return this money and restore consumer trust.
“We want to see decisive action by suppliers, individually and collectively, to address this issue and, wherever possible, to ensure that the balances they currently hold are returned to consumers. Where this can’t be done any remaining sums should be used to benefit consumers more generally, and suppliers need to be very clear with consumers about what they will be doing with this money.”
Commenting on the news, Ann Robinson, director of consumer policy at comparison site iuSwitch says: “Today’s announcement from Ofgem will be welcome news to consumers. This money may be held in closed accounts, but rightfully belongs to customers and Ofgem is absolutely right to take steps to ensure that it is returned. The parameters it has set are correct; if after all avenues are exhausted and the money still cannot be returned then the supplier should use it to the benefit of other customers.
“Over seven in ten households have gone without heating at some point this winter because of cost and over a third say that these cutbacks are affecting their quality of life or health. With so many struggling to stay warm, these funds could really make a difference.”
Ofgem has identified and outlined three key issues that it says must be resolved:
1. Reuniting individual consumers with their money
It wants to see suppliers doing all that they can to ensure that money is returned to the people to whom it is owed, with an industry-wide campaign to ensure that refunds are made wherever possible. Its new enforceable Standards of Conduct require that suppliers treat consumers fairly and it will examine whether the practices of individual suppliers have breached our rules.
2. Using balances that cannot be returned to individuals to benefit consumers more widely
Where money cannot be returned to individual consumers, it expects companies to find ways to use this money to benefit consumers more generally and be clear in communicating what they will do with this unclaimed money.
3. Preventing this issue from happening again
Suppliers’ policies and processes must prevent such large sums being retained by them, with crystal-clear communication to consumers about what to do when closing an account. It said firms should be open with customers about the size of the balances held and what they are doing with them.