The British Energy Regulatory Authority has announced new plans to protect consumers who pay their bills by standing order to “ensure that credit balances do not become excessive”. Ofgem has accused some energy companies of using accumulated customer credit as an “interest-free company credit card”. The new economic measures will also ensure that suppliers can withstand future shocks, adding that providers will be able to “cope with the ongoing storm” of industry challenges, especially in the autumn and winter. Monday’s announcement comes after the energy price cap jumped 54% in April and average bills rose 69 693 ($ 849) a year for about 18 million households with standard tariffs and 8 708 for 4.5 million prepaid customers. . Prices are expected to rise to more than 2. 2,600 a year in October, when the ceiling will be reconsidered. Read more: Energy Bills: Ofgem Schedules Frequent Top Price Reviews As regulators announce a crackdown as households face a cost-of-living crisis due to soaring energy, fuel and food prices, what do the changes mean for customers?
What are the changes?
Ofgem has proposed changes to stricter rules on the level of direct charges that suppliers can charge. It also wants to protect credit balances when businesses fail so that costs are not passed on to customers. It comes after a series of high-profile closures linked to the high cost of wholesale oil and gas. Rising wholesale gas costs, exacerbated by the war in Ukraine, have pushed energy bills to record highs in recent months. About 28 energy suppliers have collapsed since September 2021, in the wake of the surge in wholesale energy prices. Consumers paid an average of 94 94 each to cover the cost of switching to new suppliers. The regulator, which regulates the accounts of 23 million households, said companies would need to have enough working capital to operate without compromising their customers’ credit balances. Read more: Cost of living crisis: 9 top tips for saving money on technology Jonathan Brearley, CEO of Ofgem, said: “By ensuring that suppliers are well-funded, sustainable and have more resilient business models, we can avoid the supplier failures we saw last year, which caused huge costs and stress. to everyone. accounts. The story goes on “But if some continue to fail, consumer credit balances and green levy / renewable payments will be protected. They are currently used by some vendors such as an interest free company credit card. “Today’s proposals will ensure that hard-earned customers’ money is properly protected, so that a company has to pay the bill in case of failure, instead of consumers picking up the card.”
See: Why are gas prices rising?
What does this mean for consumers?
Ofgem said the changes would reduce the risk of suppliers collapsing and protect energy customers’ credit balances if they did. When energy suppliers failed, Ofgem’s existing safety net meant that two million consumers were transferred to a new supplier last year with their credit balances intact. However, under the current measures, new suppliers do not transfer the customer’s credit balance from the failed supplier. This means that the cost of replacing these balances is shared across all customer accounts. The new rules ensure that customers are quickly transferred to a new supplier with their credit remaining intact in the event of a supplier failure, according to the regulator. The proposals, which have yet to be finalized through consultation, will mean that suppliers must protect their customers’ money if they collapse and the funds are transferred from accounts credited to the replacement supplier. Read more: Rising interest rates: What it means for your money Gillian Cooper, Citizens Advice’s energy policy director, said: “Ofgem has in the past allowed energy suppliers to manage risky business models. As a result, customers are left to pay the bill when companies collapse. “We are delighted that Ofgem has heeded our warnings and is taking the necessary steps to address some of the root causes of these problems. “It must now ensure that suppliers adhere to these stricter standards so that people are better protected in the future.”
