Adam Scorer calls for 'targeted financial support' on energy bills
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A fuel poverty charity has echoed calls from a Conservative MP urging the UK’s energy watchdog Ofgem to crack down on companies accused of “stockpiling our money” and ramping up bills amid the cost of living crisis. It comes after an investigation found that gas and electricity companies are sitting on an eye-watering £2billion or thereabouts of users’ cash, the Telegraph reported. The publication also found that firms are increasing direct debit payments for customers that have thousands of pounds in credit.
Energy firms have been accused of using this cash as a cheap source of finance at a time when millions of households are suffering from fuel poverty, with bills costing double the amount they were last year on average.
“It’s my guess that hard-pressed families have no idea that part of their energy direct debits are used to provide cheap financing for their supplier, rather than actually paying for energy consumed.”
Currently, there are no restrictions in place preventing companies from using customers’ cash to keep their businesses running. Back in November, the regulator said it believes that “allowing suppliers to use some of their customer credit balances for innovation, operating cash and hedging but not for riskier spending, like funding unsustainable growth, is the right balance”.
Oxera, an analysis firm, has also found that some of the energy businesses that collapsed this year were dependent on that cash. Among these firms were Avro and Utility Point, in which the cash paid in advance by customers represented 80 percent of the firms’ total assets.
Centrica, which owns British Gas, has been accused of holding about £588million in cash that customers paid in advance. But the firm has argued that the cash was ringfenced and would not be used as working capital.
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Meanwhile, Octopus Energ and Ovo Energy also held more than £100million in customer credit, while Shell kept hold of £45million, the Telegraph’s investigation found. Octopus has also argued that it does not use customer credit for business growth, but admitted that it does use some of the cash to cover bills other consumers are yet to pay.
Shell admitted that while it does sometimes use customer credit balances as working capital, but is not reliant on them. Ofgem has previously said that companies have to announce if customer credit balances make up more than half of their assets.
This comes as millions of homes brace for a further energy bill increase when the Government’s energy price guarantee changes from £2,500 to £3,000 in April. Households with typical energy usage will see their energy bills go up by around £500 as a result of Chancellor Jeremy Hunt’s policy, but experts have warned that “everyone” will be paying more for gas and electricity in the coming months due to this decision.
Ofgem has been contacted for comment.
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