Tag: energy costs

Ofgem demands improvements from energy suppliers on customer direct debits

Energy regulator Ofgem has told a number of energy suppliers to take immediate and urgent action, after a review found a range of weaknesses or failings in the way they charge customers direct debits.

Out of a total of 17 large suppliers in the market, the majority were found to only have minor issues, but five were found to have ‘moderate or severe’ weaknesses with Ofgem demanding immediate action.

This is an initial snapshot of findings and suppliers affected will now have to submit action plans within two weeks to set out how they will take the required actions, which Ofgem will scrutinise for effectiveness and comprehensiveness.

Although we have not found evidence of unjustifiably high direct debits, as an additional reassurance for consumers, the regulator will require all suppliers that increased their customers’ direct debits by more than 100% (impacting over 500,000 customers) to review them.

Where appropriate, Ofgem also expects suppliers to adjust any miscalculations, including making repayments if needed, and consider whether a goodwill payment is warranted.

The review of domestic energy suppliers found that:

  • Over 7 million energy consumers on a Standard Variable Tariff (SVT) saw an increase in their direct debit between February and April 2022
  • On average, direct debit levels for customers on an SVT increased by 62% in this period. Most of this reflects the increased cost of gas*
  • 8% of SVT customers seeing an increase (around 500,000 households) experienced an increase of more than 100% and Ofgem is concerned by this and wants to ensure there is good reason for it (e.g., coming off an SVT, increase in energy use etc)
  •  Evidence that some suppliers’ processes are not as robust as they could be, and that this could lead to inconsistent, incorrect or poor treatment for customers
  • A lack of formally documented policies and processes within some suppliers, which risks inconsistent and poor consumer outcomes.

Ofgem recognises that increases experienced by consumers will differ depending on a range of factors, and that some of these, such as recent tariff changes, high debit balances or recent meter reads, can drive large adjustments to customer direct debits.

But it is for suppliers to ensure that direct debits are set correctly based on all relevant information available, and that they clearly communicate any changes in a way that helps consumers understand their payments.

Jonathan Brearley, Ofgem CEO, said: “We know how hard it is for energy customers at the moment so it’s crucial that the amount they pay each month in direct debits is right so they can manage their money.

“Suppliers must do all they can, especially during the current gas crisis, to support customers and to recognise the significant worry and concern increased direct debits can cause. 

“We know there is some excellent service out there, but we want to make sure that it’s consistent and standard across the board. It’s clear from today’s findings on direct debits that there are areas of the market where customers are simply not getting the service they need and rightly expect in these very difficult times.

 “Today’s findings show that with the urgent changes we are now expecting, the current system will be much fairer for consumers. Bringing down the price of gas is not in Ofgem’s control; however, we will do all we can to have a fair system and ensure suppliers look after their customers.”

The Ofgem assessment divided supplier findings into three groups:

  1. No significant issues (four suppliers)
  2. Minor weaknesses (seven suppliers)
  3. Moderate to severe weaknesses (five suppliers)

Suppliers in the first group, with no significant issues found, are British Gas, EDF, ScottishPower and SO Energy. Our review found that these suppliers generally had robust processes in place, although we did make some recommendations for improvement, and Ofgem will work with these suppliers for continuous improvement. We are asking these suppliers to review customer direct debits to ensure they are correct, as an additional assurance for consumers.

The second group, with minor weaknesses, consisted of Bulb, E.ON, Octopus Energy, Outfox the Market, Ovo, Shell and Utility Warehouse. For this group of suppliers, we identified some weaknesses or gaps in their processes that could lead to poor consumer outcomes.

Examples include lack of documented policies or guidance for staff, potentially not taking account of all relevant factors when setting customer direct debits, or risks that some customers’ direct debits are not assessed when appropriate. We have started compliance engagement with these suppliers to secure improvements.

Suppliers in the third group had moderate to severe weaknesses identified. This group includes Ecotricity, Good Energy, Green Energy UK and Utilita Energy, and covered a spectrum of weaknesses, ranging from inadequately documented or embedded processes, weak governance and controls, to an overall lack of a structured approach to setting customer direct debits.

Ofgem is concerned that in some cases this could lead to customer direct debits being set incorrectly, or not being evaluated for a long time, which can cause the build-up of either unnecessarily large credit balances or debt, depending on whether the customer is under- or overpaying.

Ofgem is starting compliance engagement with these suppliers to drive rapid and robust improvements to processes and reassess customer direct debits where necessary. If these suppliers don’t take action fast enough, Ofgem will consider enforcement action.

Also in this group, with severe weaknesses were TruEnergy and UK Energy Incubator Hub (UKEIH). In both cases we found suppliers did not have a consistent and structured approach to setting customer direct debits, and found severe concerns over the maturity of their processes, putting consumers at a serious risk of inconsistent or poor outcomes, with need for rapid and significant improvement.

To this end, we are considering whether enforcement action is warranted. Since the findings were made, UKEIH have ceased to trade and so we will not pursue any further action against them.

If Ofgem does not see swift and sufficient improvement, as well as redress for consumers where necessary, the regulator will not hesitate to initiate enforcement action against more suppliers, which can include fines, enforcement orders and banning the acquisition of new customers.

  Ofgem has now instructed suppliers to:

·         review the accounts of all customers whose direct debit was increased by 100% or more between 1 February and 30 April 2022, to assess whether the uplift was appropriate

·         adjust any miscalculations and consider whether a goodwill payment is warranted in the circumstances

·         address any process issues which may have incorrectly led to significant increases or other poor consumer outcomes, such as systemic over- or underpayment, and 

·         submit action plans within two weeks to set out how they will take the required actions, which Ofgem will scrutinise for effectiveness and comprehensiveness.

Journalistic website Money Saving Expert (MSE) sent Ofgem a dossier of information earlier this year on the same issue, after it was raised by consumers.

This is all part of the wider work that Ofgem is doing to make the energy market fairer, including a robust recent review into lessons learnt from Storm Arwen, a more frequent and fairer price cap, and most recently, action to improve the financial resilience of companies.

As well as reviewing supplier performance, Ofgem also recently reviewed its own performance, through a wide-ranging report led by independent auditor Oxera.

Rocio Concha, Which? Director of Policy and Advocacy, said: “The cost of living remains consumers’ number one priority, yet Which? has heard concerning stories of consumers having their energy direct debits miscalculated or increased by huge amounts, while our research shows many customers are struggling to understand their bills and pricing.

“It’s encouraging to see the regulator taking action over poor performance and Ofgem should not hesitate to impose penalties on any suppliers that fail to make the necessary improvements.

“At a time when consumers are paying more than ever before for energy, the regulator must also work with government and suppliers to explore ways of using data proactively to offer targeted support to those in most need of help before they have to turn to debt charities.

“Which? will seek to work with businesses in energy and other key sectors to find more ways to support consumers through the tough times ahead.”

Charity offers fuel grant to ex-miners

A CHARITY is offering a £200 grant to former coal miners to help them cope with the rise in fuel costs in 2022.

CISWO – the coal mining charity – has launched the scheme to provide some support towards combatting the huge hike in the energy price cap which came into effect in April.

The one-off grant will be available to former coal miners, or their partners or widows, who are identified as being particularly vulnerable due to being on a low income, live in their own home and are responsible for paying for energy costs.

It is also only available to those former mineworkers who have ten years’ service in the industry or those whose last place of work was in the industry. Only one grant is available per household.

The price rises will see millions of people having to pay around £700 more each year to heat their homes.

And with former miners often suffering from health issues, poor mobility and managing on low incomes, they may be disproportionately impacted by the changes.

Nicola Didlock, Chief Executive at CISWO, said: “We are very aware that many of our beneficiaries are vulnerable and susceptible to the cold, especially those on low incomes and trying to cope with ill-health, mobility issues and older properties to maintain.

“We want to ensure that those individuals are identified and supported to keep warm and healthy, particularly during the colder months as the energy price rise begins to impact those most affected.”

CISWO’s Personal Welfare team will be identifying people in need and supporting them to get the help they are entitled to. As well as the CISWO grant, they will help people to obtain other financial aid and subsidies from the government.

The team will also be on hand to provide information about other support on offer from CISWO for former coal miners and their dependants, including:

  • Confidential home visiting service
  • Advocacy, information, advice and guidance
  • Emotional support
  • Benefit applications
  • Access to mobility equipment
  • Reducing loneliness and isolation
  • Access to holidays and convalescence

For more information about claiming the £200 CISWO grant, visit:

www.ciswo.org.uk 

or call 01506 635 550.

Keep cosy and save money

With home energy costs rising, many of us are worrying about our gas and electricity bills. The City of Edinburgh Council is working in partnership with Changeworks and Home Energy Scotland to help keep you and your home warm for less.

Their friendly advisors are on hand to give you:

  • free energy saving advice to help save money on your bills
  • support with fuel debt
  • help to find out if you’re eligible for any grants or funding for energy efficiency home improvements.

If you’re a Council tenant you can contact the Energy Advice Service for free by phoning 0800 870 8800, emailing warmth@changeworks.org.uk or visiting www.changeworks.org.uk

If you’re a home owner or private renter you can contact Home Energy Scotland for free advice on 0808 808 2282 or visit www.homeenergyscotland.org

National Energy Savings Week: Finance expert on reducing fuel usage and saving money

Personal Finance Expert at CashLady.com, Paul Wilson, shares his top tips on how Brits can reduce their fuel usage and save money this Energy Savings Week: 

It looks like energy prices are likely to rise higher than ever before in 2022. Making sure you’re getting the best deal has never been more important, and taking steps to cut back your fuel usage should be on everyone’s agenda.

Even small changes can help put some money back in your pocket and big tasks, like moving to a new tariff, are worth looking into. This Energy Savings Week, why not try some of these nine ways to reduce your fuel usage and help keep your finances on track. 

1.          Draught excluders

Make sure your doors aren’t letting out valuable heat and letting in the cold. You can buy permanent solutions that attach to the bottom of your door, or decorative excluders that are a quick and easy option. Draught excluders are an inexpensive and effective way to quickly tackle any lost heat from your home.

2.            Seal your windows

In the same vein as draught excluders, making sure your windows are sealed against the cold is a quick win. Older houses especially can have less efficient windows. Window sealing strips can be bought from most DIY stores and are available in various styles to also complement home decor. Additionally, if you have curtains, use them! Lined curtains will keep your room warm in winter and cooler in summer, meaning less need to rely on your heating or cooling systems.

3.            LED Bulbs

The initial outlay may be a little steeper when it comes to LED bulbs. However, they use 75% less energy than their incandescent counterparts, so it’s a switch worth making. They also last longer and so you won’t need to buy them as often which results in long-term savings and less waste. 

4.            Plan and prepare 

Simply being mindful of how and when you use energy can lead to some simple savings. Many of us have our heating on a timer; regularly reassess if the times you use the heating still make sense. Perhaps you still have the same settings you had over the Christmas break, but now you’re home less during the day. There may also be evenings when you’re out and don’t need the heating at all. Turn it off before you leave so you aren’t wasting unnecessary energy.

5.            Be mindful

Just as you can plan and prepare when to have your heating on, you can also consider where in the house you actually need the heating. If the spare room is used for the rare times you have guests, then you can turn that radiator off and shut the door. Radiator valves are also there to be used. Smaller box rooms may be fine with a lower setting. Not everyone you live with will like the same level of heat; children’s rooms may need a lower temperature if they tend to get hot in the night. Think carefully about how you are using your heating, not just when you use it.

6.            Other appliances

There are a whole host of things we use daily in our homes that burn fuel. Make sure lights are switched off when rooms are not in use, put post-it notes on the switches as a reminder if needs be. Try not to use the dryer as this is a huge energy burner, instead put clothes on radiators that are being used anyway. Washing your laundry in large loads rather than little and often is another way to be more efficient. Consider batch cooking some of your weekly meals and freezing them. That way, you’re having to cook less which means using the oven less. 

7.            Credit where it’s due

Find out from your energy company if you’re in credit. If you have regular meter readings and pay by direct debit, you may have been paying too much. This can result in you being in credit. You can choose to carry this credit over, which may reduce your monthly bills, or you can ask for a refund. Energy companies have to issue a refund if you are in credit and you could save this towards future bills or just put it aside for a rainy day. 

8.            Your tariff

Traditionally, moving onto a company’s default tariff has been the most expensive option. As soon as your fixed tariff is coming to an end, you should speak to your energy company about a new deal. However, with energy prices now so high, the capped default price may actually be cheaper than the fixed option. Do your homework and find out if you may now be better off staying with the default tariff until prices (hopefully) decrease, or if your specific usage means you would be better off with a new fixed deal.

9.            Change providers 

As with moving to a different tariff, switching providers is now not as cut and dried as it used to be. As many as 20 energy firms have gone bust recently, so you need to make sure you choose a provider that is stable. Use price comparison sites to see if moving companies could be a good thing, but be sure to do your sums first and don’t assume it will lead to savings. You should also only switch at the end of your contract as, quite often, firms charge an exit fee if you still have several months left on your deal. 

Paul Wilson is a Consumer Finance Expert at Financial Conduct Authority authorised and regulated credit broker Cash Lady.

Record gas prices drive up price cap by £139

Customers encouraged to contact supplier for support and switch to better deal if possible

  • Support available for customers struggling to pay bills or in vulnerable circumstances with additional help for those on prepayment meters
  • Energy suppliers sign up to industry commitment to reach out to those who most need help this winter
  • Customers can avoid the increase by shopping around or asking their supplier to put them on a better deal

The energy price cap will increase from 1 October for the 15 million customers it protects. Those on default tariffs paying by direct debit will see an increase of £139 from £1,138 to £1277. Prepayment customers will see an increase of £153 from £1,156 to £1309. 

This increase is driven by a rise of over 50% in energy costs over the last six months with gas prices hitting a record high as the world emerges from lockdown.

Surging global fossil fuel prices are already driving up inflation for consumers, making fixed rate energy tariffs not covered by the price cap, as well as petrol and diesel more expensive.

The price cap offers a safety net for customers who haven’t switched by making sure that suppliers only pass on legitimate costs.

Those on default tariffs are saving an estimated £75-£100 or £1 billion every year as a result.

Any customer in vulnerable circumstances or worried about paying their energy bill should contact their supplier to access the support available.

Customers may be eligible for extra help such as affordable debt repayment plans or payment breaks, emergency credit for prepayment meters and a £140 bill rebate under the Warm Home Discount.

Last week suppliers also signed up to an industry commitment to reach out to those who most need help this winter.

Customers can also shop around to save money before the increase takes effect on 1 October.

Those who don’t want to switch supplier or are unable to can ask their supplier to put them on a better deal.

Jonathan Brearley, chief executive of Ofgem, said: “Higher energy bills are never welcome and the timing and size of this increase will be particularly difficult for many families still struggling with the impact of the pandemic.

“The price cap means suppliers only pass on legitimate costs of supplying energy and cannot charge more than the level of the price cap, although they can charge less.  

“If you’re struggling to pay your bill you can get in touch with your supplier to access the help that’s available and if possible, shop around for a better deal.

“We have put tough rules in place to ensure suppliers treat customers who are struggling with bills fairly, and welcome their commitment to reach out to those who most need help this winter. Where help is not forthcoming, we will not hesitate to act.

“I appreciate this is extremely difficult news for many people, my commitment to customers is that Ofgem will continue to do everything we can to ensure they are protected this winter, especially those in vulnerable circumstances.”

Ofgem adjusts the price cap twice a year based on the latest estimated costs of supplying energy.

The biggest and most unpredictable factor is the wholesale cost of electricity and gas paid by suppliers and influenced by global markets. This accounts for roughly 40% of the overall price cap level.

Gas prices have risen to a record high in Europe due to a recovery in global demand and tighter supplies. This is increasing the cost of heating homes and pushing up electricity prices.

Last winter, the level of the cap fell by £84 after passing onto customers the savings from lower wholesale energy costs as countries went into lockdown and demand fell.

Free virtual business support from Zero Waste Scotland

Businesses in Edinburgh are being encouraged to bring their costs down with free, one to one, virtual support available from Zero Waste Scotland.

Through the recently launched Energy Efficiency Business Support Service, which is supported by the European Regional Development Fund (ERDF), Zero Waste Scotland is offering small and medium-sized businesses (SMEs) energy assessments to identify where simple actions could result in significant financial savings.

Support can begin immediately, and assessments typically find 24% savings on business energy bills. For a typical SME in Scotland that’s around a £2,500 saving on energy costs.

Iain Gulland, Chief Executive of Zero Waste Scotland, said: “We know businesses are exploring every measure that could benefit their budget at the present time, as well as helping to futureproof their operations.

“I would encourage any business in Scotland to contact our advisors and see where we can work together to identify savings.

“Lighting can account for over 20% of a business’ total energy bill, and more than half for offices with gas central heating. It’s clear that energy can be a significant cost to a small business, and with many in Scotland negotiating the unprecedented effects of the coronavirus pandemic on their bottom line addressing energy inefficiency could be a welcome solution to reducing overheads.

“There’s a strong argument to be made that economic recovery must go hand in hand with environmental responsibility, and our work with SMEs in Scotland reflects that too. Our advisors have already supported organisations to identify over £200million in savings – that’s a clear demonstration of the demand for sustainable opportunities for growth.”

Businesses interested in a virtual energy assessment can receive a dedicated, expert advisor who will work with them on a one to one basis and assess current energy use data to identify and quantify savings.

Examples of savings typically identified include:

  • installing more efficient heating systems,
  • improving the insulation of a building or investing in more energy efficient equipment, such as a state of the art oven or a more efficient refrigeration unit, and
  • investing in LED lighting. 

Dedicated support from Zero Waste Scotland’s Energy Efficiency Business Support Service identified annual savings of nearly £1,800 for Goldenace Mini Market in Edinburgh.

A detailed assessment undertaken by expert advisors appointed to the convenience store on a one-to-one basis recommended several energy-saving actions that would both reduce costs and help the environment. These included investing in LED lighting and replacing fridge and freezer units with more modern, efficient models.

Aleem Farooqi, owner of Goldenacre Mini Market, said: “I am absolutely delighted with the new double-glazed refrigeration cabinets and the LED lighting. I have already seen my electricity bills drop by about 30%, saving me about £1,800 a year.

“The support from the service helped me to identify and fund the changes to my shop and I am really happy with the results.”

The full case study and further case studies are available on the Zero Waste Scotland website.

To find out more, or to apply, visit www.energy.zerowastescotland.org.uk. Alternatively, contact our advisors directly by calling 0808 808 2268 or emailing EnergyEfficiency@zerowastescotland.org.uk

The Energy Efficiency Business Support Service is part of Zero Waste Scotland’s Resource Efficient Circular Economy Accelerator Programme, which will invest £35million in Scotland in resource efficiency projects thanks to support from the European Regional Development Fund (ERDF).