Energy Regulator Ofgem has cleared energy companies of getting bills wrong or benefitting from “free loans” through overcharging direct debit companies. However, the regulator said that firms needed to make monthly direct debit demands clearer to customers.

Earlier this week consumer association Which? published the results of its own survey which suggested that many direct debits for gas and electricity bills were too high, effectively providing firms with free loans until the overcharge was reimbursed.

However, the watchdog Consumer Focus said it was reassured that no malpractice had taken place.
“It will be reassuring to customers that there’s no evidence of energy companies systematically over-collecting direct debit payments,” said Audrey Gallacher of Consumer Focus.

“It’s still the cheapest way to pay for energy, and spreading the cost over a year can be a convenient way to cope with large bills.”

The Ofgem review followed a series of complaints by customers that energy companies were charging them far more on direct debit payments than the amount of gas and electricity they were actually using.

However, the regulator has said it is satisfied that the six largest energy firms are not engaged in systematic over-collecting.

“Our investigation found no evidence that suppliers are recovering more money from direct debit customers than they are due,” said Ofgem chief executive Alistair Buchanan.

However, he criticised the “lack of transparency and poor communication” by suppliers, who failed to explain clearly to customers why their demands were being raised.

“Suppliers need to manage customers’ direct debit payments much better, especially at a time when household budgets are under pressure,” Mr Buchanan said.

Which? said that the regulator had still failed to tackle the fundamental problem of overcharging. The regulator found that customers paying by direct debit were in credit by an average of £74 on their electricity bill and £84 on their gas bill, and that 13% of customers were more than £100 in credit on their energy bills.

“It seems incredible that energy companies can take hundreds of pounds more than they need to from their customers, and profit from the interest that this money will earn at our expense,” said Martyn Hocking, editor of Which? Money.

“While a small amount of credit built up over the summer months can be used up during the winter, it is difficult to see how a £200 credit will be used up - particularly as the customer makes the same payment each month,” he added.

This entry was posted on Friday, March 27th, 2009 at 2:31 pm and is filed under Budgeting, Credit Ratings and Reports. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.