The energy regulator has revealed a crackdown on household suppliers to prevent them from accumulating credit balances for customers who pay by direct debit.
Review of the matter by Ofgem, a scarecrow for many billpayers, found that Â£ 1.4bn of customer money was languishing in the hands of businesses in 2018 because of overpayments.
He said a series of reforms would at least see that sum returned to customers – the equivalent of Â£ 65 per household on average – although a group of consumers said they had seen evidence of credit balances ranging up to Â£ 1,000.
The watchdog explained that providers are expected to adjust fixed monthly payments, which are based on estimates energy consumption, over a year.
This is to eliminate the disparities caused by less energy consumption in summer than in winter.
But its report found that customers were clearly paying too much and Ofgem feared the money was being used to finance “unsustainable business practices”.
The regulator said it had to consult on an “automatic refund” policy, which would take effect on a customer’s contract start anniversary.
Its planned reshuffle would also force companies to make a “quick” repayment of a credit balance, if a customer requests it.
A third proposal was to impose a cap on the credit balance that a company could hold.
Regulator intervention puts even more pressure on suppliers at a time when large companies have suffered under pressure from the government price caps on so-called default rates to prevent customers from being overcharged.
Ofgem chief executive Jonathan Brearley said the new measures would help households at a time of tight budgets due to COVID-19[female[feminine disruption of earnings.
“These new proposals would ensure that suppliers do not keep more customer money than is absolutely necessary, potentially returning millions of pounds of money back to customers.”
A spokesperson for Energy UK, which represents the suppliers, replied: âDirect debit payment helps customers budget by making sure they pay a regular amount each month, even if their actual energy consumption is varies considerably throughout the year.
âSome vendors already automatically reimburse credit balances, so now we need to take a detailed look at Ofgem’s proposals.
“We look forward to working with them and our members to find an industry-wide best practice approach that supports customers and works for suppliers.”
The plans have been warmly received by consumer groups and price comparison sites.
Natalie Hitchens from whom? said it was right for customers to be in control of their own money.
She said: “Our research revealed that many energy customers who paid by direct debit were credited with their energy supplier, some up to Â£ 1,000, and not all suppliers are ready to reimburse.”