Majority of suppliers found to have issues with the way they set direct debits
Thousands of households may be in line for compensation payments from their energy suppliers, after the regulator noted that some had serious issues in the way they set direct debits.
An investigation by energy regulator Ofgem has revealed that the majority of energy suppliers have at least some level of failings in the way they have set direct debits for their customers.
More than 500,000 households saw their bills more than double earlier this year when the energy price cap was hiked.
And the regulator has ordered energy firms to review those increases and to adjust them where necessary, with ‘goodwill’ payments to those who have been unfairly charged.
The study found that on average 62% of households saw their direct debits increase between February and April, with 8% seeing their bills more than double.
And it also ordered suppliers to raise their standards when it comes to setting those bills in future.
Where suppliers are going wrong
According to Ofgem, just four suppliers were found to have no issues with their handling of direct debits ‒ British Gas, EDF Energy, ScottishPower and SO Energy.
While the regulator said they “generally had robust processes in place”, Ofgem nonetheless had some suggestions for them on improvements.
There was then a second group of seven suppliers ‒ Bulb, E.ON, Octopus Energy, Outfox the Market, Ovo, Shell and Utility Warehouse ‒ who were found to have minor weaknesses.
These issues included a lack of documented policies or guidance for staff, not taking account of all relevant factors when setting direct debits, and risks that some direct debits are not being assessed properly.
The regulator said it had started compliance work with these suppliers to ensure they improve those processes.
Finally, there was the most troubling group ‒ Ecotricity, Good Energy, Green Energy UK and Utilita Energy.
Ofgem said there were moderate to severe issues with these suppliers, with issues such as inadequate processes, weak governance and controls, and the lack of a structured approach to setting direct debits.
The regulator warned that this could lead to direct debits being set up incorrectly, meaning households end up significant in credit or debt.
Ofgem has warned them to raise their game immediately, or else enforcement action will begin.
My energy direct debit experience
At this point, it’s perhaps worth highlighting my own experience with rocketing direct debits for energy bills.
Back in February my supplier, Shell Energy, notified me that my energy payments would be rising sharply, to the point that my monthly payment would need to shoot up to an eye-watering £269.
Given the fact I was paying £111 a month before that, it was quite the increase.
To be honest, I was too shell-shocked at that point to actually do anything, but a couple of months later realised that these payments were out of whack.
I’ve now cut it to £244, which is still incredibly high, and am comfortably in credit which should help when our energy use increases as the weather turns.
Of course, by that point, there will be a new energy price cap in place, which will likely mean that my bill grows substantially once more.
Rising bills
We already know that the energy price cap will be increasing in October, but the degree to which it is likely to rise is staggering.
Back in May, Ofgem suggested that it was likely to hit £2,800 from its current £1,971. However, this week the regulator’s chief executive warned that we are on course for a bigger hike.
While he didn’t put a figure on it, the industry analysts Cornwall Insight suggested it would hit £3,244.
That’s a frighteningly high amount for households to have to cough up each year for their energy bills, particularly when you consider the rising costs people face on virtually everything else.
Energy suppliers will therefore have an immediate opportunity to show that they have taken Ofgem’s warnings on board and are able to act responsibly when setting direct debits for their customers.