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Ofgem under fire for delaying plans to tackle energy giants’ cash grab

Two-year wait to end £2.5bn charge on customers not using direct debits

By Luke Barr

ENERGY watchdog Ofgem is dragging its feet over a £2.5billion rip-off by power giants which are slapping extra charges on customers if they do not pay by direct debit.

The regulator, run by Jonathan Brearley, has been under pressure to stop firms charging customers extra if they choose to pay their bill in cash, by cheque, or over the phone using a bank card.

But it says it will not clamp down on the practice for at least two years, meaning customers – many elderly or less well-off – will continue to pay through the nose.

Some prefer not to pay by direct debit as they fear energy firms will set the monthly figure too high. Companies have been accused of hoarding billions of pounds of customers’ cash and of putting up their direct debits even when they have large credit balances.

Those who choose another payment route pay a heavy penalty. The scale of the additional charges, which can be as much as £254 a year, was first revealed by The Mail on Sunday earlier this month.

With an estimated five million households affected, the levy is expected to raise about £1.25billion in 2023. That is the same amount in one year as it hauled in over the previous three.

The charges have been widely condemned by campaigners. Many customers are unaware they are being hit by hefty penalties because of their method of payment.

The surcharge was previously capped at £79 a year. Since 2021, however, the maximum that suppliers can charge customers has quietly been hiked to more than three times that figure. The increase is calculated using an algorithm based on energy prices, which have risen rapidly due to the war in Ukraine.

Companies try to defend their cash grab by arguing it costs them more to process cash, cheque or phone payments compared with automated direct debits. Ofgem agrees. However, this has nothing to do with the price of energy and therefore there is no justification for an increase in the surcharge.

Tory MP Craig Mackinlay, a former member of the influential Work and Pensions Committee, said he was ‘appalled’ at the size of the charge. He said: ‘Ofgem is best placed to bear down on this. But the energy giants themselves need to not charge these excessive amounts, and I would call upon them to keep administrative premiums at a very bare minimum.’

Consumer champion and former Pensions Minister Baroness Altmann, who has campaigned on energy stealth charges, called for a review. She said: ‘There is definitely a failure of regulation here.’

Most customers affected remain unaware they pay the fee at all, according to a survey by energy firm Octopus. It is one of a raft of sneaky energy levies highlighted by The Mail on Sunday.

A separate standing charge, which is meant to cover the cost of running the network, has also ballooned. Octopus, Britain’s third largest supplier, said it had refused to pass on the full increase to its customers – keeping it at £80. Octopus chief executive Greg Jackson said Ofgem should do ‘all in its power to drive down the sinister, hidden costs creeping up on pensioners’. He added: ‘This surcharge has got out of hand. We’re asking Ofgem to review it as a matter of urgency.’ Ofgem said that the levy for those not paying by direct debit was under review as part of a ‘draft programme of work’ into charging policies. However, the regulator added that no changes would be made until ‘the winter of 2024-25’.

Financial

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2023-01-29T08:00:00.0000000Z

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https://mailonline.pressreader.com/article/283227332241343

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