Ofgem investigating suppliers over direct debit payments

Tuesday 03 May 2022 16:07

Home energy providers are under new scrutiny from Ofgem, with the market regulator launching a compliance review of direct debit payment claims.

Business Secretary Kwasi Kwarteng revealed the review on Twitter, noting that some companies had increased payments “beyond what is required”.

The issue first surfaced in March when consumer guru Martin Lewis told MPs some businesses had doubled direct debits in a bid to improve cash flow.

The founder of moneysavingexpert.com described the move as a violation of the rules and claimed it happens across the board.

AM City approached Ofgem for comment.

Households are currently grappling with a deepening cost of living crisis, with food, fuel and energy bills having soared in recent months.

The consumer price cap has soared 54% to a painful £1,971 a year with expectations of further hikes this fall.

This follows the carnage in the energy sector, with the collapse of 29 suppliers since September, directly affecting more than four million customers.

Energy companies have struggled with the lethal combination of soaring wholesale costs and price cap constraints, while many suppliers have failed to properly protect themselves in the pursuit of customers in a highly competitive market.

Ofgem has unveiled market reforms and commitments such as hedging controls, temporary penalties to encourage customers to switch companies, and is seeking to reduce the price cap implementation period from two months to one.

According to the Financial Times, he has also spent £14million working with consultants such as KPMG, PwC and Baringa, as he seeks additional advice to deal with soaring gas and electricity prices .

The £14m awarded in the first quarter exceeds the £13.54m paid in 2020 and 2021, which will fuel concerns that the regulator is increasingly relying on expensive consultants.

The regulator has also been criticized for delegating £1.8bn to suppliers in public money to compensate them for bringing customers into the supplier of last resort process, while Bulb Energy’s fall into special administration cost the taxpayer £2.2billion.