Energy credit balance reforms should ‘herald the end’ of advanced payment

Ofgem’s plans to overhaul the way credit balances are refunded should “herald the end” of advanced payment for many customers, an industry chief has said.

Doug Stewart, chief executive of supplier Green Energy UK, was speaking following the publication of plans which, if approved, would see retailers automatically refund surplus consumer credit balances every year.

The move by the regulator is part of a clampdown on unsustainable business practices and is designed to limit the amount which could be mutualised should a supplier fail.

The retail chief, who said he has pressed both government and Ofgem for “many years” to stop some energy suppliers from holding on to credit balances, welcomed the proposals and added they will provide a “much-needed boost” for households and the economy.

He said: “The reform is the right thing to do and it can’t come soon enough. This should herald the end of payment in advance for many customers in the UK. Looking ahead, it will provide households and the UK economy a much-needed boost: £1.4 billion is not to be sniffed at.

“Liberating this money back to its rightful owners, the customer, will allow them to spend it in the economy, and with the multiplier effect it’s an economic boom just waiting to happen. It also gives time to those suppliers who have adopted this business model to get their houses in order.

“Perhaps this is the moment that we see a realignment between the energy industry, the customer and the regulator – one that is based on sound finance, trust and transparency. Put it another way, would you shop in Tesco if they said you had to pay £200 today to be allowed in store next week? Well done Ofgem for making the move.”

Elsewhere, former EDF customer services director Steve Hayfield urged caution.

Hayfield, who is now chief executive of Charis Grants, an organisation which manages funds and grants on behalf of major utilities, agreed there should be an annual review period and if there is a credit balance and the bill is based upon an up-to-date reading, the money should be refunded to the customer.

He added: “However, I would urge some caution against a blanket or mandated practice because there are some scenarios where this may not be in the best interest of the customer. The option to carry the credit forward to reduce monthly payments should be considered.

“Also, great care should be taken to ensure that customers who have a credit refund are not further exposed to building up a debt because the refund was made at a point in time before any increased winter usage and future payment levels are not adjusted to take that into account.”

Hayfield previously told Utility Week that he believed there should be a “level playing field” when it comes to social obligations.

He continued: “At Charis we also believe that Ofgem should build into this process a unified provision for the treatment of unclaimed credit balances that suppliers are unable to trace and return to customers who have moved home.

“My view is that all suppliers should follow the same process and after all efforts to trace customers and return credits have been exhausted, those credit balances should be diverted to support the fuel poor and vulnerable, above and beyond existing regulatory obligations.”