Electricity customers’ £65 refund
Energy companies will be ordered to return £1.4 billion to UK households whose accounts are in credit.
The proposals by regulator Ofgem could see millions of customers handed back an average of £65 each.
People who pay by fixed direct debit pay the same amount each month based on their estimated consumption. They typically build up a credit balance during the summer when their energy use is lower and then draw down on this credit during winter.
Suppliers should set the payments so that customers’ credit balance returns to £0 each year on the anniversary of when they started the payments.
However, many customers who pay by fixed direct debit are overpaying, resulting in surplus credit balances.
Ofgem found that as much as £1.4 billion was held in surplus credit balances in October, 2018.
Ofgem is concerned that some suppliers may use customers’ surplus credit balances to fund otherwise unsustainable business practices.
The “auto-refund” policy would require suppliers to refund any credit balances, for domestic credit customers paying by fixed direct debit, above £0 each year on the anniversary of when they started their contract.
Jonathan Brearley, chief executive of Ofgem, said: “These new proposals would ensure that suppliers are not holding on to more of customers’ money than absolutely necessary, potentially returning millions of pounds of customers’ money.
“This is an important step in making the retail energy market fairer for consumers at a time when many are facing financial hardship.”
The auto-refund proposal would stop surplus credit balances growing year-on-year but would not stop suppliers building up surplus credit balances during the year. To address this, Ofgem is also proposing to introduce a credit balance threshold for all domestic suppliers.
These new proposals, which would come into force next year, would also reduce the amount of credit balances held when a supplier fails, reducing the cost to the market and ultimately consumers of covering these additional costs.