Energy regulator Ofgem has put forward new proposals to make it easier for customers to get refunds from energy firms. This could see customers who pay their energy bills by direct debit getting automatic refunds annually if they pay too much.
Many people who pay via this method have their direct debits set at a high level by the energy firms but end up using far less energy than predicted over the course of the year. At present, customers are responsible for requesting any money owed to them by their energy company. However, under new proposals, energy suppliers would refund the excess paid automatically.
Energy firms hoarding thousands of pounds
One of the issues highlighted by Ofgem is that under the current system, energy firms are hoarding significant sums of money that rightfully belong to their customers. The regulator said that energy firms collectively hold a surplus of around £1.4 billion, and some were using the overpayments for what it described as ‘unsustainable practices.’
Huge numbers of people pay their energy bills by direct debit, with the amount typically set by the energy firms. However, some allow the customer to pay slightly less than the suggested amount or to make additional payments. The payment amount recommended by suppliers is based on a prediction of how much energy the household will use over the course of the year.
Energy usage typically reduces during the warmer seasons and increase in the autumn and winter. However, the direct debit amounts are designed to cover the predicted overall cost considering seasonal increases and reductions in usage.
Despite this, many customers end up paying more than they need to, with energy firms then hanging on to these overpayments. If and when the customer requests them, they are then refunded. However, it can take months for the process to be completed in some cases.
Ed Dodman, director of regulatory affairs at the Energy Ombudsman, said, "Just as people are expected to pay their energy bills on time, we think it's fair to expect energy suppliers to do the same with refunds. We know from looking at complaints that suppliers can sometimes take too long to issue refunds, which can be stressful for consumers."
Automatic refunds on the anniversary of the contract start date
The new proposals from Ofgem would see customers receiving automatic refunds of overpayments once a year on the anniversary of the contract start or payment start date. The regulator is keen to see the new rules come into force next year. It is thought that on average, customers would receive back £65.
Energy UK, which represents suppliers across the nation, said that some suppliers already carry out automatic refunds for customers. The group said that it would now be looking more closely at the proposals put forward by the regulator.