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Energy firms accused of increasing direct debits in stealth raid on customers

·4-min read

Energy providers have been accused of increasing households' monthly direct debit payments in a breach of industry rules as they battle to survive surging power costs.

Citizens Advice is calling for action by Ofgem, the energy watchdog, after being contacted by a string of consumers hit with an unexpectedly high payment increase over the past few weeks. One household's bills almost doubled to £117 a month, it said.

Gillian Cooper, head of energy policy for Citizens Advice, said rising direct debits was "a real concern and an issue that people are contacting us about."

It came as another small energy supplier, Daligas, went bust, affecting 9,000 customers and taking the total number of failures to 12 since the crisis began.

Meanwhile the National Grid warned that an undersea cable used to import power would take 18 months longer than hoped to fix after it was damaged by a fire last month.

Suppliers generally calculate customers' direct debits based on an estimate of how much energy a consumer uses over the year. They frequently adjust payments to reflect actual usage and any tariff increases - but are not allowed to increase direct debits just to raise money.

Ms Cooper said: “We know in the past that some struggling suppliers have used higher Direct Debits to shore up their finances - this is completely unacceptable.

“With so much uncertainty in the market for consumers, Ofgem needs to be extra vigilant and intervene if necessary to ensure suppliers are only increasing payments for valid reasons.”

The charity cited examples of steep increases, such as a customer who was more than £160 in credit to their supplier but who nonetheless had their monthly direct debit hiked from £83 to £108.

Another customer was nearly £700 in credit but the supplier wanted to increase their monthly payments by £85 to £1921.96, Citizens Advice said.

Darren Jones MP, chair of the parliamentary business, energy and industrial strategy committee, said: “Customers shouldn’t be unknowingly forced to pay higher bills each month to help the cash flow of their energy supplier.

“Any suggestion that companies are doing this without the explicit consent of the customer needs to be investigated by Ofgem.”

A global crunch on supplies has led to a sixfold increase in the wholesale gas price and fourfold increase in wholesale power prices.

The price of oil and other commodities is also climbing, threatening wider inflation over winter for households across Europe.

The International Energy Agency warned on Thursday that demand for oil is being pushed up by the squeeze on natural gas, threatening higher prices at the pumps.

In the UK, the price cap on energy bills prevents companies from passing on the full extent of increases straight away to their customers, meaning suppliers that have not locked in lower prices in advance are floundering.

Bulb Energy, which has about 1.7m customers, has been the subject of complaints on Twitter about direct debit increases.

The company said it contacted customers every year ahead of winter to make sure their account was in good shape, adding: “We’re doing that as usual this year, and will work with our members to make sure their payments are right for them.”

Gareth McNab, director of external affairs at debt counselling charity Christians Against Poverty, was among those to contact the company after he received an email from Bulb saying his own monthly direct debit payments were due to rise from £155.19 to £262.30.

He said: “Much smaller increases in bills than this are wrecking hundreds of thousands of people’s lives.

“To have less than a month’s notice that your bill is going to be tens or hundreds of pounds more - you just wonder how people are going to survive."

A spokesman for Ofgem said it expected “suppliers to regularly evaluate their customers’ direct debit amounts, to ensure they are accurate and appropriate.

He added: “Suppliers are not allowed to increase direct debits simply for the purpose of raising capital."

Customers concerned about the size of their payments can ask for a refund or complain, and can eventually go to the Energy Ombudsman if the issue is not resolved.

The soaring costs of energy threatened further chaos this week when CNG, a major UK gas shipper - which arranges for gas to be moved through pipes to a utility’s customers - said it will stop serving domestic utilities after its finances were hit by the collapse of clients.

Energy companies generally have 25 days to find a new shipper, and risk having to buy gas at high rates on the spot market.

Household supplier Good Energy, a CNG client, said Good Energy’s customers will be “unaffected by the move”.

It added: “We have been in close contact with CNG for several weeks and are currently in the process of securing alternative arrangements to ensure that there is no disruption to our business and customers.”

Last night, National Grid said a giant cable importing electricity from France will be out of action for longer than envisaged following a fire at converter station in Kent last month.

Half of its capacity will be back online next month, but the it will not be fully restored until October 2023, compared to previous expectations of March 2022.

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