Weekend press round-up: Energy firms to be investigated for increasing direct debits for millions

National media coverage of the sector across the Easter weekend included reports of energy retailers being investigated over claims they overcharged customers following the price cap hike. Meanwhile, the government has said it would be too complicated to allow consumers to opt out of receiving its £200 bill rebate in October. And a new bill to be debated by MPs would require water companies to publish quarterly reports on the impact of sewage discharges on the natural environment, animal welfare and human health.

Energy firms to be investigated for increasing direct debits for millions of customers

Some of the country’s biggest energy firms are to be investigated over claims they have been overcharging customers following a surge in the price cap.

Ofgem, the market regulator, said that there have been “troubling signs” that some companies have increased households’ direct debits by more than necessary to cover a £693 increase in average bills.

Suppliers are allowed to raise monthly charges, but it must be according to the household’s usage and you must be notified of this beforehand – usually at least 10 days before it goes up.

Customers can dispute this amount, or submit an exact meter reading to ensure the increase is linked to their actual usage.

Ofgem also said some businesses may have been directing customers to tariffs that are not in their best interests.

Charging customers more than necessary allows suppliers to build up a cash safety net in case wholesale prices surge again in the wake of the Ukraine crisis. The practice is banned because it is unfair to the consumer.

Ofgem is now launching a series of reviews to assess whether energy retailers are complying to these rules.

Jonathan Brearley, the watchdog’s chief executive, said: “In examining the gas crisis, we have identified one of the root causes of the failures of many of those suppliers who exited the market is related to the way that they have managed the money paid to them by customers.

“This is money that is intended to pay for energy, or collected to support the wider development of renewable energy.

“However, some suppliers have been using these balances to prop up their finances, enabling them to follow more risky business models with reduced financial resilience and higher likelihood of failure. If that supplier becomes insolvent, the cost of replacing those balances has to be picked up by other suppliers and ultimately all energy consumers.”

Daily Mirror

UK households to pay administration costs of energy discount scheme

British households face paying tens of millions of pounds in administration costs for the government’s controversial scheme to reduce energy bills by £200 in October.

The energy bills support scheme has been widely criticised by opposition parties and consumer groups because the £200 discount will have to be repaid by consumers in annual instalments of £40 starting in 2023, when electricity and gas prices are forecast to still be at elevated levels.

A government consultation document about the scheme suggests the costs of administering the scheme will be recovered separately via Britain’s energy price cap, which dictates bills for 22mn households.

Based on past energy rebate schemes, these costs could be as much as £28mn, according to the document from the Department for Business, Energy and Industrial Strategy.

The revelation over administration costs has amplified calls from fuel poverty campaigners for the £200 discount to be turned into a grant that does not have to be repaid — at least for the very poorest households.

Peter Smith, director of policy and advocacy at National Energy Action, a charity, said that if left unchanged, the discount would do “very little to help soften the brutal impact of the energy crisis”.

“The Treasury and [the business department] must urgently reform the proposal for the poorest households by making it a grant not a loan,” he added. “If they don’t, a scheme designed to help will make the lives of those in fuel poverty worse.”

Gillian Cooper, head of energy policy at consumer watchdog Citizens Advice, said: “People cannot be put in the position of paying back the rebate on top of even higher bills — it’s a recipe for hardship. The government should remove repayments and turn the rebate into a grant, or at the very least suspend repayments ‘till prices fall to normal levels.”

The business department’s consultation document describes how energy suppliers, which will deliver the £200 discount on bills, will be able to recover “reasonable costs”.

Such costs will probably be “incorporated” into future levels of Britain’s energy price cap, according to the document, adding that the government will “work with [energy regulator] Ofgem to ascertain the most appropriate way to incorporate these costs”.

The document said ministers considered the 2014 “government electricity rebate”, which recompensed households for the costs of environmental policies, to be a “close proxy to the anticipated costs” of the energy bills supports scheme.

The cost of applying the rebate in 2014 was estimated at £18mn to £28mn, it added.

The Financial Times

UK Government responds to energy petition calling for right to refuse £200 bill credit in October

The UK Government has responded to an online petition asking for energy customers to be given the right to refuse the £200 ‘loan’ which will be credited to around 28 million electricity accounts in October and repaid over five years from April 2023.

The Department for Business, Energy and Industrial Strategy outlined all the support measures Chancellor Rishi Sunak has put in place to help households deal with Ofgem’s 54 per cent price hike, which came into effect on April 1.

Its official response on the petition-parliament website said: “Allowing consumers to opt out of receiving the reduction on their bills would likely increase the administrative costs of the scheme.”

The £200 bill credit ‘loan’ is for all domestic electricity customers including those using a pre-payment meter in Scotland, England and Wales, and will automatically be added to their accounts in October.

They will then repay £40 per year from April 2023 for the next five years.

However, a petition created by Sharron Espin challenged the UK Government’s proposals and has received more than 11,800 signatures of support from people across the country who want the right to refuse it.

But on April 14, the Department for Business, Energy and Industrial Strategy responded to the petition and referred to the £200 bill credit as a “grant” which may cause even more confusion as consumer experts have been trying to help energy customers understand that even though the proposal sounds like a loan, it’s not a loan – more of a levy on their bill.

The Department explained: “To spread the cost of the energy price shock, from October 2022 the government will provide funding to all energy suppliers to pass a £200 reduction on to domestic electricity customers’ bills. This will be recouped through energy bills over five years from 2023.

“The government will not profit from this scheme. The amount recouped by the government over five years from 2023 will be no greater than the sum paid out to consumers from October 2022.

“We would like to emphasize the bill reduction is not a loan, rather, it is a grant which will be delivered to households by their energy supplier to help reduce the burden of energy bills from October. It does not create a liability for any individual. There is no interest due on it, no debt attached to it, and it will not affect recipients’ credit rating. It is a grant now with a levy on future bill payers.”

It continued: “We know that there will be different considerations for consumers depending on their circumstances and the way in which they pay their energy bills. We will continue to work with consumer groups and electricity suppliers to ensure that we deliver the scheme in a convenient way to all eligible customers.”

The Daily Record

Thousands of households on benefits to have automatic energy bill hikes frozen

Thousands of households who claim benefits including Universal Credit will have automatic hikes to their energy bills temporarily frozen.

The Department for Work and Pensions (DWP) has announced it won’t increase gas and electricity payments that are automatically deducted from benefits.

It will give around 100,000 struggling families the opportunity to discuss options for paying their bills with the DWP and suppliers.

The move also means their benefit payments will remain stable as gas and electricity bills soar.

Some people who get Universal Credit, Jobseeker’s Allowance, Employment Support Allowance, Income Support and Pension Credit have their energy bills deducted from their benefits.

This is called ‘third party deductions’ and sometimes Fuel Direct.

For the next 12 months, only claimants will be able to increase the payments and the DWP will refuse supplier requests to hike bills.

The change means that even if a claimant’s energy bills increase, their benefit payments will remain stable.

It will give families the chance to speak with energy suppliers to discuss alternative payment options or pay the increase in bills privately.

Alternatively, households can ask the DWP to increase the payment from their benefits if they prefer.

Despite the freeze to automatic deductions rising, energy bills will still rise and claimants will have to find a way to pay the increase.

Deductions will continue to be made at the current level.

David Rutley, minister for welfare delivery, said: “Budgeting requirements differ from household to household and this change allows people to maximise their benefit payment to suit their needs while also capitalising on other support available.”

The DWP will also not process new energy supplier requests for ongoing energy consumption payments where an arrangement is not already in place.

But it will continue to consider requests from energy companies to make deductions for arrears which are lower, fixed amounts that prevent alternative enforcement action being sought.

The Sun

Water companies could be forced to reveal how many otters they killed with raw sewage

Water companies should be forced to report how many otters and other animals they kill each year by dumping raw sewage into rivers, according to a new proposal to be voted on by MPs next week.

A new Bill, presented by Tim Farron, the former leader of the Liberal Democrats, would ban water companies from allowing sewage to flow into rivers and introduce a new reporting requirement, naming and shaming firms that kill animals and pollute wild swimming spots.

Water companies have discharged raw sewage into waterways more than 750,000 times in the past two years, usually when existing infrastructure is overloaded with rainwater.

Wild swimmers have been told to avoid open-water spots and otters have been poisoned by “forever chemicals” that stay in their bodies for life.

The Rivers Trust has said that only 14 per cent of rivers meet standards for good ecological status and that sewage is now the biggest risk to animals living in or near rivers.

It is thought that the sewage discharges could also be a threat to dogs.

Mr Farron’s 10-minute rule Bill will be heard on Tuesday and, if approved, would “require water companies to publish quarterly reports on the impact of sewage discharges on the natural environment, animal welfare and human health”, according to a copy of the document seen by The Telegraph.

It would also require all water companies to have at least one representative of an environmental group on their board to hold other members to account, and set “mandatory timescales” for the end of discharging into Britain’s waterways.

Daily Telegraph

Surge pricing opens door to extreme energy bill shocks

When a blast of Arctic wind battered Texas and triggered failures in the state power grid, those inside homes where the lights stayed on felt blessed.

But for 29,000 households on “dynamic” energy tariffs that illusion was shattered when bills for thousands of dollars arrived from their electricity providers.

The story highlights the riskier side of surge pricing, which can leave consumers vulnerable when unusual events or emergencies cause freak energy market swings. It is this type of tariff that British utility companies and the Government argue could also be key to the green energy transition.

They say introducing price incentives could help ease the strain on the power grid as we switch to a future of electrically powered cars and heating systems. In practice, people pay more for electricity at times when many households are using it, for instance when cooking dinner during the evening. Bargains could be had at quieter times.

The idea was endorsed earlier this month in Boris Johnson’s energy security strategy and by Kwasi Kwarteng, the Business Secretary, who claimed it “totally makes sense”.

Ofgem, the UK energy regulator, will next month gain the legal powers to begin the technical process that will make mass switches to surge pricing possible. Yet concerns remain about what can happen when things go wrong, at a time when confidence in the regulator has been shaken by the collapse of financially precarious suppliers due to unprecedented winter price spikes.

David Holt, the president of the US-based Consumer Energy Alliance, says the experience of Texas in February 2021 provides a cautionary tale of when large numbers of people embrace surge pricing with little understanding of the risks.

There, a company called Griddy let customers buy their electricity at wholesale prices in exchange for a monthly fee of about $10 (£7.70). Most of the time, this meant they saved money compared to less risky but more expensive fixed plans.

But when the Arctic storm hit, knocking out gas pipelines, causing power failures and sending wholesale prices soaring, they were left brutally exposed – racking up bills of thousands of dollars in mere days.

Barely a fortnight afterwards, one woman from Nevada, near Dallas, told The New York Times she had already been charged $6,200 for the month. Another man who lived in a Dallas suburb said his bill came to more than $16,700.

Holt, whose family was among those who lost power, believes this was the direct result of poor regulation and reckless planning by the authorities, who should have ensured the power grid was more resilient.

“Extremely hot weather and extremely cold weather is going to happen,” he says. “Part of our concern is regulations that inadvertently create situations that reward volatility.

“In Texas, the lesson we learned was that surge pricing simply adds to the costs and the unreliability of the energy grid.”

Octopus Energy has offered a form of surge pricing to customers since 2018 through its “Agile” tariff. It claims users reduce their peak demand by more than a fifth.

The amount paid by customers is capped at 35p per kilowatt hour, limiting the risk. The current average limit under the Government’s energy price cap is 28p per kWh for standard variable tariff customers – which lags behind market prices.

Since October, anyone on the Agile tariff would have paid the maximum rate almost constantly due to surging wholesale gas and electricity prices. Octopus currently recommends consumers choose different plans.

Yet Greg Jackson, its chief executive, is still an enthusiastic supporter of “time of use” tariffs, which he says will drive down costs for all – even if only some people opt in.

He compares the system to “yellow label” reduced food in supermarkets, arguing that when there is abundant energy available at less busy times, people should be able to take advantage of cheaper prices.

“By making use of the system when it’s under-utilised,” he adds, “that makes it cheaper for everyone, because you’re not adding to the demand for electricity at peak times.”

However, he argues that consumers should not be forced to adopt such tariffs and caps should be in place to protect against “wild swings”.

Daily Telegraph

Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House