New rules being introduced by UK energy regulator Ofgem should make it harder for energy companies to overcharge customers, in an effort to reduce some of the pressure on UK households.
At the moment, it’s very common for energy companies to overcharge customers – particularly during the hotter months when less is being spent to heat the home – building up a pot of credit in the account. While it’s true that this can help to cover more expensive winter months, Ofgem have suggested that companies are currently guilty of treating in-credit accounts like an “interest-free company credit card”. This means using the excess money to cover company costs, at the short-term expense of their customer’s wallets.
If you’re not sure whether you’re overpaying, the best way to check is through your online energy account. Make sure you’ve sent in an up-to-date meter reading, as estimated bills may not give an accurate reflection of how much you’re spending. After you’ve sent in a reading, you may need to wait until your next billing date to get an updated overview of your account – but once you do, you’ll be able to see how much your account is in credit, and whether you have been overpaying on your monthly bill.
While there isn’t any regulation to stop companies doing this yet, there’s plenty that you can do yourself. Firstly, you can amend your direct debit so that it only covers your actual costs, with possibly a small overpayment if you want to build up a buffer for the winter. Some companies make it really easy to do this through your online account, while others may take a phone call. Either way it’s worth doing, as that money can be better used on other bills or dropped into a savings account.
The proposals don’t just look at overpayments themselves, but at what will happen to customers’ credit balances should a company go bust. The idea is that companies will have to start protecting this money, and ensuring that the costs of a refund and passed along to their customers.
Ofgem’s Chief Executive, Jonathan Brearley, said this will: “make sure that customers’ hard-earned money is properly protected so that a company must foot the bill if it fails, rather than consumers picking up the tab” – tightening rules to ensure that companies can’t use in-credit accounts in ways that are risky for customers or against the rules.
While this won’t tackle the underlying issue of higher prices, it is a step in the right direction at a time when many people feel taken advantage of by their gas and electricity providers. Ofgem want to ensure that companies are more robust, so we can avoid the situation of last summer when many smaller companies went bankrupt and had to have their customers transferred to other firms. This should mean more stability and a fairer deal for homes across the country. You can read more about the current energy bills crisis elsewhere on our blog – including advice for businesses and information about what support is available from the government.