Today, it was discovered that energy companies have been accused of holding nearly £2 billion of their customers’ hard-earned cash and increasing direct debit repayments despite billpayers being in credit.
The Telegraph stated that gas and energy companies including EDF, Centrica, and Shell, together with dozens of smaller suppliers, have been hoarding up to £2 billion of their consumers’ hard-earned cash.
The energy corporations were accused of utilizing their customers’ funds as a cheap source of credit, despite the fact that millions of people were struggling due to the rising cost of living.
A client of EDF who was charged almost £2,300 for energy she did not use stated that she still faces increasing costs despite hardly utilizing her heating system this winter. The business has since issued an apology and reduced the customer’s payments.
It comes as average monthly energy costs have nearly quadrupled in the past year, from £1,277 in October 2021 to £2,500 today.
Energy companies have been accused of holding nearly £2 billion of their customers’ hard-earned cash and increasing direct debit repayments despite the fact that billpayers were in credit.
Energy expenditures have nearly doubled in the past year, jumping from an average of £1,277 in October 2021 to a current average of £2,500.
Former Ofgem board member Christine Farnish criticized the watchdog yesterday for allowing the practice to flourish under its supervision.
Ms. Farnish, who resigned from her position earlier this year, told the Telegraph: ‘Energy companies are permitted to use advance consumer payments to fund their own enterprises.
My hypothesis is that cash-strapped families are unaware that a portion of their energy direct debits are utilized to offer inexpensive financing for their supplier, rather than paying for energy consumed.
In a cringe-worthy film featuring Grant Shapps and an Elf on the Shelf, the government claimed that homeowners could save up to £230 annually by implementing a few simple steps this winter.
However, despite customers being encouraged to reduce their energy consumption to save money, it was discovered that suppliers were raising customers’ direct debit payments even when they were hundreds of pounds in credit.
Separate analyses conducted by the consultancy firm Oxera and the Telegraph revealed that some businesses held hundreds of millions of pounds in consumer credit.
It was revealed that Centrica, the owner of British Gas, held about £588 million in prepaid funds from their customers.
At the time of the investigation, Octopus and Ovo held more than £100 million in consumer credit, while Shell had access to £45 million.
There are no regulations prohibiting firms from using client funds to maintain operations.
Octopus stated that it did not use customer credit to fuel development, while Centrica denied using the payments as working capital. Shell acknowledged using consumer credit amounts as operating capital, in addition to other available cash.
Centrica, the owner of British Gas, denied using the cash as working capital, although Shell accepted utilizing customer credit amounts as working capital in addition to other available funding.
A spokesperson for EDF said that the company does not use credit balances “to fuel our business growth” and that the regulator has not raised any concerns.
The Oxera analysis, which evaluates Ofgem’s role in regulating the British energy market, found that several of the 28 defunct energy companies relied excessively on customer credit to fund expansion.
Avro and Utility Point, for example, were so reliant on advance payments from consumers that, before to their demise, these monies comprised almost 80% of their total assets.
In response to the discoveries, Ofgem stated that enterprises must give a warning if client credit balances constitute more than 50% of their total assets.
British households’ credit is safeguarded in the event of business failure, but these costs are ultimately added to the taxpayers’ bailout tab.
As a result of the failure of 28 energy companies since 2021, up to £2.7 billion was added to UK energy bills, while the bailout of energy company Bulb alone cost the state £6.5 billion.
In response to the Oxera report, an Ofgem representative stated, “Much of the comments and analysis found that totally ringfencing credit balances would eliminate a substantial amount of working capital, hence lowering customer rates.”
Customers may still request the return of their credit amount from their supplier at any time.
Consumers owe Octopus and Ovo more money than they owe to customers, and those in credit can withdraw their monies at any time.
A spokesperson for EDF said that the company does not use credit balances “to fuel our business growth” and that the regulator has not raised any concerns
»Energy providers ‘hoarding up to £2Billion’ of customers’ cash, hiking direct debit charges«