Ofgem investigates suppliers over direct debit payments
Household energy suppliers are under fresh scrutiny from Ofgem, amid concerns they have increased direct debit demands for customers “beyond what is required.”
Business Secretary Kwasi Kwarteng has revealed on Twitter that the market regulator has launched a compliance review, with suppliers expected to respond in the next three weeks.
The issue first came into focus in March when consumer guru Martin Lewis told MPs multiple energy firms had doubled direct debits in a bid to improve their cash flow.
The founder of MoneySavingExpert.com described the move as a breach of the rules and claimed it was happening across the board.
Ofgem is preparing to undertake a number assessments over the coming months to ensure suppliers are not breaching licence conditions, understands Morning Wire
Households are currently embroiled in a deepening cost of living crisis, with food, fuel and energy bills spiking in recent months.
The consumer price cap has soared 54 per cent to a painful £1,971 per year with expectations of further hikes this autumn.
This follows carnage across the energy sector, with 29 suppliers collapsing since September, directly affecting over four million customers.
Energy firms have struggled with the lethal combination of soaring wholesale costs, and the constraints of the price cap, while many suppliers failed to hedge properly in pursuit of customers in a highly competitive market.
Ofgem has unveiled market reforms and pledges such as hedging controls, temporary penalties for encouraging customers to switch firm, and is looking to reduce the implementation period for the price cap from two months to one.
It has also spent £14m in work with consultancies such as KPMG, PwC, and Baringa, as it seeks further advice for dealing with surging gas and electricity price, according to The Financial Times.
The money awarded in the first quarter outstrips the £13.54m paid over both 2020 and 2021, which will fuel concerns that the regulator is increasingly relying on expensive consultants.
The regulator has also faced criticism for delegating £1.8bn to suppliers in public money to compensate them for on-boarding customers in the supplier of last resort process, while the fall of Bulb Energy into special administration has cost the taxpayer £2.2bn.
When approach for comment, Ofgem said: “Our top priority is to protect consumers and we recently wrote to suppliers to alert them that we are commissioning a series of market compliance reviews to ensure, amongst other things, that they are handling direct debits fairly, and that overall, they are held to higher standards for performance on customer service and protecting vulnerable customers.”