Energy giants cling on to £400m in overpaid bills

Watchdog orders Big Six suppliers: Give the money back to customers

ENERGY firms are heading for a showdown with industry regulator Ofgem over hundreds of millions of pounds the watchdog says firms should be able to return to customers.

Ofgem argues that energy groups hold more than £400million in so-called dormant accounts which could be refunded to customers. But the energy groups claim the figure is just £250million.

The cash is held in accounts where customers have switched provider, moved house or in some other way lost contact with their energy company, but who have money owed from overpaid bills.

It has been amassed over the past six years by the Big Six energy firms – British Gas, EDF Energy, SSE, Scottish Power, npower and Eon.

Ofgem has said the big energy firms hold at least £202 million from 3.5 million households and £204million from 300,000 business customers. But energy industry sources claim calculations show less than £250million of such funds are held.

‘There is a discrepancy between how much Ofgem says we owe, which is £400 million to £500million, and what we think we owe, which is about £250million,’ said a senior executive.

Ofgem called on the suppliers to try to return the funds in February, backed by MPs including Energy Minister Greg Barker, who called the sums calculated by Ofgem ‘astonishing’.

A spokesman for Ofgem said: ‘We have told them to get their houses in order on their funds and return the money. We said we thought it was at least £400million, but we expect that sum to go up not down. Clearly it is a huge issue. We want the right, lasting solution to this, which will get the money back to customers.’

Ofgem said that if it is impossible to trace customers who are owed refunds, the industry should use the money for the benefit of all consumers and make it clear how this has been done. Based on Ofgem’s estimate the sum equates to £58 per household and £680 per business customer.

The industry is drawing up plans for an advertising campaign to raise the issue of dormant accounts for consumers who are unaware they are entitled to refunds. But the figure on which the campaign will be based is at odds with that of Ofgem.

The regulator has asked the firms to provide

details of their calculations. The energy industry has repeatedly answered charges that it holds on to customers’ money unfairly by noting it is owed far more by customers who do not pay their bills. It also said it is unable to return cash to many customers as they have not informed them of their contact details.

Ofgem has warned suppliers the issue must not be allowed to happen again. It said the move to make energy firms return the money ‘builds on recent commitments to provide automatic refunds to current direct debit customers who are in credit’. This refers to the long-running issue of customers who pay by direct debit and are often in credit with energy firms who fail to refund them in summer when bills fall.

This month the Competition and Markets Authority begins its first full-scale investigation into the energy industry, though it is still not clear whether the probe will also look at the national grid, which delivers power around the country and contributes hundreds of pounds to the cost of the average annual energy bill of £1,346.