Ofgem Announces New Measures to Protect Customers

Ofgem Announces New Measures to Protect Customers

The UK’s energy regulator Ogfem  has announced new steps to safeguard consumers who pay their bills via direct debit in order to “ensure credit balances do not become excessive.”  

The additional financial measures will also guarantee that suppliers can survive future shocks,  adding that providers would be able to “weather the persistent storm” of business issues, particularly during the fall and winter seasons.  

This comes after Ofgem had launched an investigation on energy suppliers charging direct debit cusomers more than what required, with Kwasi Kwarteng speaking on twitter last month saying:  

“Some energy suppliers have been increasing Direct Debits beyond what is required. 

I can confirm @Ofgem has today issued Compliance Reviews. Suppliers have three weeks to respond. 

The regulator will not hesitate to swiftly enforce compliance, including issuing substantial fines.” 

Ofgem has accused some energy companies of using customers’ accumulated credit like an “interest-free company credit card”. 

The regulator has now suggested modifications to tighten the regulations governing the amount of direct debits that suppliers can charge, also aiming to safeguard credit balances when businesses fail so that the expenses are not passed on to customers. 

According to Ofgem, the new rules ensure that consumers are rapidly transferred to a new provider with their credit balances intact if a supplier fails.  

The measures, which must yet be finalised through a consultation, would require suppliers to preserve their customers’ money if they go bankrupt and pass on monies from credit accounts to the successor provider. 

Jonathan Brearley, CEO of Ofgem, said: “By ensuring that suppliers are operating well-financed, sustainable, and have more resilient business models, we can avoid the supplier failures we saw last year which caused huge stress and worry and added costs to everyone’s bills. 

“But if some do still fail, consumer credit balances and green levy/renewables payments will be protected. Currently they are used by some suppliers like an interest free company credit card. 

“Today’s proposals will make sure that customers’ hard-earned money is properly protected so that a company must foot the bill if it fails, rather than consumers picking up the tab.” 

Households are currently facing an increasing cost of living issue, with food, fuel, and electricity prices skyrocketing in recent months.  

The consumer price cap  has risen 54% to a painful £1,971 per year, with additional increases expected this fall.  

This follows the collapse of 29 energy providers since September, affecting nearly four million clients directly. 

Gillian Cooper, head of energy policy at Citizens Advice, said: “Ofgem has previously allowed energy suppliers to run risky business models. As a result, it’s customers who’ve been left to foot the bill when companies collapse. 

“We’re glad that Ofgem has listened to our warnings and is taking necessary steps to tackle some of the root causes of these issues.