London Daily

Focus on the big picture.
Saturday, Feb 22, 2025

Energy firms warned over hiking direct debits

Energy firms warned over hiking direct debits

The government has warned energy firms not to hike direct debit payments for customers who are making "huge efforts" to cut usage.

The business secretary has written to suppliers asking them to ensure bills reflect what homes are actually using, and do not over-estimate charges.

Grant Shapps said he was concerned by reports that bills were rising despite people cutting back on energy use.

Regulator Ofgem has been asked to look at making billing "more responsive".

Ofgem said it had already called on firms to address the issue, but would be prepared to take further action if necessary.

Direct debit is the lowest cost method of paying energy bills, but can lead to overcharging, because suppliers calculate bills according to a customer's previous consumption and spread charges for higher winter use over the year.

Ofgem said a review conducted earlier this year identified "moderate or significant issues in a number of suppliers" and that it had taken up the issue with energy companies.

But last week, The Times reported that some customers, including those on a fixed-rate tariff, had seen their direct debit payments soar even though they had reduced the amount of energy they use.

Energy prices have been rising, due in part to sanctions imposed against Russia, a major oil and gas producer, following its invasion of Ukraine.

The government's Energy Price Guarantee has limited the amount households can be charged, so that a typical annual bill is £2,500. However, that is nearly double what customers were paying last winter, and many households are trying to reduce their energy use to keep their bills down.

Milder weather this month - which has been 2.2C warmer than the average November - has meant that some homes have been able to hold off from putting the heating on.

In his letter to the chief executives of UK energy companies, Mr Shapps said he was "disturbed... that some consumers are saying their direct debits are going up when they are making huge efforts to reduce their usage to save money at a time when household incomes are squeezed".

He told energy firms: "I am interested to understand how you intend to ensure that your direct debit system does not over-estimate charging."

"I am very keen that all suppliers find a way to make their systems more responsive to these positive changes in consumer behaviour," Mr Shapps said.

Energy UK, the industry trade body, said rising direct debits were inevitable as bills had to reflect the doubling in energy prices since last year.

"Suppliers are required to set direct debits at a level that allows the customer to pay the same amount each month, without running up too much credit or getting into too much debt," said Dhara Vyas, Energy UK's director of advocacy.

"If customers use less energy than anticipated, then they will build up credit and this will be reflected the next time the supplier reviews their direct debit.

"We know many households will be trying to cut down where they can right now but it's only when a reduction is shown in consistently lower meter readings, for example, that suppliers can reflect it," Ms Vyas said.

A recent Ofgem review found that the majority of suppliers had only "minor issues" with their processes for setting direct debits, she added.

Earlier this year, Ofgem conducted a review into how energy firms were charging customers by direct debit, following complaints about soaring charges and credit balances.

About 500,000 households had seen their payments double, according to Ofgem, despite prices rising by 54%.

An Ofgem spokesperson said that following the review the regulator had set out the changes it required from suppliers, and would continue to work with the government on the problem.

"More now than ever, customers need to be confident that they aren't paying more than necessary to manage their energy bills," the spokesperson said.

Ofgem would "not hesitate to take any further action necessary to make sure customers are treated fairly" he added.

Household energy costs are set to rise again next year.

Last week, Ofgem announced another increase in the official price cap - the level energy bills would be without the government intervention to keep bills down. Ofgem said without the Energy Price Guarantee from January the typical annual energy bill would have been £4,299.

While the government support will continue, it is being scaled back from April, when a typical annual bill will increase to £3,000.

Some groups across the UK, including those on means-tested benefits, pensioners and some people on certain disability benefits will receive cash payments.


Newsletter

Related Articles

0:00
0:00
Close
Good News: Senate Confirms Kash Patel as FBI Director
Officials from the U.S. and Hungary Engage in Talks on Economic Collaboration and Sanctions Strategy
James Bond Franchise Transitions to Amazon MGM Studios
Technology Giants Ramp Up Lobbying Initiatives Against Strict EU Regulations
Alibaba Exceeds Quarterly Projections Fueled by Growth in Cloud and AI
Tequila Sector Faces Surplus Crisis as Agave Prices Dive Sharply
Residents of Flintshire Mobile Home Park Grapple with Maintenance Issues and Uncertain Future
Ronan Keating Criticizes Irish Justice System Following Fatal Crash Involving His Brother
Gordon Ramsay's Lucky Cat Restaurant Faces Unprecedented Theft
Israeli Family Mourns Loss of Peace Advocate Oded Lifschitz as Body Returned from Gaza
Former UK Defense Chief Calls for Enhanced European Support for Ukraine
Pope Francis Admitted to Hospital in Rome Amid Rising Succession Speculation
Senate Republican Leader Mitch McConnell, at the age of 83, Declares His Retirement.
Whistleblower Reveals Whitehall’s Focus on Kabul Animal Airlift Amid Crisis
Politicians Who Deliberately Lie Could Face Removal from Office in Wales
Scottish Labour Faces Challenges Ahead of 2026 Holyrood Elections
Leftwing Activists Less Likely to Work with Political Rivals, Study Finds
Boris Johnson to Host 'An Evening with Boris Johnson' at Edinburgh's Usher Hall
Planned Change in British Citizenship Rules Faces First Legal Challenge
Northumberland Postal Worker Sentenced for Sexual Assaults During Deliveries
British Journalist Missing in Brazil for 11 Days
Tesco Fixes Website Glitch That Disrupted Online Grocery Orders
Amnesty International Critiques UK's Predictive Policing Practices
Burglar Jailed After Falling into Home-Made Trap in Blyth
Sellafield Nuclear Site Exits Special Measures for Physical Security Amid Ongoing Cybersecurity Concerns
Avian Influenza Impact on Seals in Norfolk: Four Deaths Confirmed
First Arrest Under Scotland's Abortion Clinic Buffer Zone Law Amidst International Controversy
Meghan Markle Rebrands Lifestyle Venture as 'As Ever' Ahead of Netflix Series Launch
Inter-Island Ferry Services Between Guernsey and Jersey Set to Expand
Significant Proportion of Cancer Patients in England and Wales Not Receiving Recommended Treatments
Final Consultation Launched for Vyrnwy Frankton Power Line Project
Drug Misuse Deaths in Scotland Rise by 12% in 2023
Failed £100 Million Cocaine Smuggling Operation in the Scottish Highlands
Central Cee Equals MOBO Awards Record; Bashy and Ayra Starr Among Top Honorees
EastEnders: Four Decades of Challenging Social Norms
Jonathan Bailey Channels 'Succession' in Bold Richard II Performance
Northern Ireland's First Astronaut Engages in Rigorous Spacewalk Training
Former Postman Sentenced for Series of Sexual Offences in Northumberland
Record Surge in Anti-Muslim Hate Crimes Across the UK in 2024
Omagh Bombing Inquiry Concludes Commemorative Hearings with Survivor Testimonies
UK Government Introduces 'Ronan's Law' to Combat Online Knife Sales to Minors
Metal Detectorists Unearth 15th-Century Coin Hoard in Scottish Borders
Woman Charged in 1978 Death of Five-Year-Old Girl in South London
Expanding Sinkhole in Godstone, Surrey, Forces Evacuations and Road Closures
Bangor University Announces Plans to Cut 200 Jobs Amid £15 Million Savings Target
British Journalist Charlotte Peet Reported Missing in Brazil
UK Inflation Rises to 3% in January Amid Higher Food Prices and School Fees
Starmer Defends Zelensky Amidst Trump's 'Dictator' Allegation
Zelensky Calls on World Leaders to Back Peace Efforts in Light of Strains with Trump
UK Prime minister, Mr. Keir Starmer, has stated that any peace agreement aimed at ending the conflict in Ukraine "MUST" include a US security guarantee to deter Russian aggression
×