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177 MPs back Robert Halfon’s campaign on energy bills

Calling your energy company

Robert Halfon MP tells us how he’s pushing energy companies to ensure non-Direct Debit customers pay a fair price for paying their bill. With support from 177 MPs across the parties, he’s demanding action.

I was outraged to hear from a constituent that his elderly mother had received a letter from the Co-op Energy Company stating that she was going to be charged £63 extra unless she switched to pay her gas and electric bills by direct debit.

It is understandable that there is an extra administrative cost to not paying bills by direct debit, but £63 is excessive. Shockingly, upon investigation, I found that the majority of energy companies across the UK impose these extra charges, or instead, discount bills substantially for those paying by direct debit. This is particularly the case for the Big Six.

Penalised for paying by cheque or cash

Out of 32 energy companies surveyed, 17 energy companies charged more to customers who were not paying by Direct Debit. And figures from the Department of Energy and Climate Change show that the average annual surcharges were £114 in total – £41 for electricity and £73 for gas.

This is unfair, and hurts the low paid and vulnerable the most.

Some smaller companies charge their customers exactly the same regardless of how their customers pay their bills. These include Ecotricity, Good Energy, Green Energy UK, and LoCO2, and many water companies charge nothing or less than £5 for using other payment methods.

All companies should attempt to follow this example, as it shows that it is even more unreasonable for some of these companies to charge such exorbitant amounts.

Routinely ripped off by energy companies

The poorest and most vulnerable are routinely ripped off by energy companies when it comes to paying for the most essential of items, gas and electric. In the UK, 45% of people do not pay their electricity bills by Direct Debit. Those on lower incomes often prefer to manage their finances by paying for things with cash, and some people do not even have access to bank accounts.

Energy companies should make it clear to customers why they are being charged more for using a particular payment method and the price must be no more than what it costs the company to process the payment. I’m recommending £24 per year (£2 per month) as a reasonable limit to cover costs.

Many companies are including the cost of late payment and sending reminders in their justification for charging more for traditional payment methods. This is not fair on non-direct debit customers who always pay on time. These extra costs created by some customers should be paid for by late fees. In this way, the culprits are directly accountable and innocent people do not have to subsidise them.

There should be a government or regulator inquiry to look at why some companies are able to allow customers to pay by whichever method they prefer without incurring an extra cost. This would ensure that businesses are not hoodwinking vulnerable bill-payers, who might be unaware or unfamiliar with direct debit, into paying more than they have to.

I’d like to hear your views on these discounts, do you think the charges are fair? Have you been stung by these charges before?

Which? Conversation provides guest spots to external contributors. This is from Robert Halfon MP for Harlow, Essex. All opinions expressed here are Robert’s own, not necessarily those of Which?.

Comments
Member

I very much agree that these problems should be resolved to help consumers.

Another issue that I would like to raise is the way that energy supply companies frequently keep consumers in credit, often hundreds of pounds, when they do pay by direct debit. I want to pay for the energy that I use – no more and no less.

Member

Maybe Energy companies should be made to pay interest on any excess money of at least RPI %age rate. I’m sure they wouldn’t hold onto it for long then

Member
kurgamoppa says:
13 May 2015

I use the excess as a savings, I took 160 out earlier in year towards a new washer dryer,

Member

The energy companies should be asked what charges they make for payment by methods other than direct debit, and then to explain how those charges arise. Much of the energy debate is driven by emotion – we need facts and figures to debate it rationally.
However it should be Ofgem’s job to get hold of this information and to ensure that the energy companies charge fairly. I cannot see this in the Retail Market Review, but may have missed it. If they have not addressed bill payment methods in detail then MPs should be asking them to deal with it.
Incidentally, I have found that the licence conditions do allow a supplier to levy a charge for late payers; so others who pay on time need not subsidise them.

Member

Our energy company does not understand the concept of “being fair”. Having had the privilege of direct access to our bank account via direct debit it is now holding on to a substantial sum of money in our old account at our previous address which we vacated 5 months ago. ( We are continuing with the company at our new address purely to avoid early exit charges.). The company is now ignoring repeated emails .
.. This company is greedy, is abusing its power, and is a disgrace to civilised society. Energy customers should never have been allowed to be trapped in this position. The government needs to alter the regulations as the so-called “market” is unfair to consumers. The matter has been referred to of the Energy Ombudsman.

Member
kurgamoppa says:
13 May 2015

energy ombudsman should help, I’m on eon and can get any overpay put back in my account in around 4 working days had 160 towards new washer in January,with no probs at all, very easy company to talk to ,and helpful. good luck.

Member

How about you force energy companies to refund these excessive overpayments for say the last 6 years.

And on the figures you’ve quoted above looks like the Co-Op have been profiteering to the tune of around £58 a year. I wonder what the founding members of the Co-Op would think of how the current management is using their name.

And FYI like all other compensation schemes, I won’t benefit from this suggestion either.

Member

A converse argument in favour of their payment charges…

The companies save costs when users pay regularly by DD and administer their accounts on line. So why shouldn’t those users be rewarded with lower costs?

If you pay by cheque and it costs more to administer your account, you should pay more. It really is that simple. The energy companies are no different than insurance companies who vary your insurance premium based on your risk, age and track record.

However, the actual cost of the energy should be the same across the board, but the increased cost of delivering the energy to your location and the cost variation in managing your account should reflect the true cost. Hence some users pay more than others.