Ofgem reviewed the direct debit arrangements of the six major suppliers after customers complained about significant increases in amounts they were being asked to pay. Ofgem was concerned that suppliers were doing a poor job in explaining the basis for payments. Energy suppliers had said they would make some improvements in the areas identified by the investigation. But Ofgem wants to ensure it can take action to protect consumers if there are significant problems in future.
The new condition in suppliers’ licences would mean they must ensure payment levels are clearly explained and based on the available information. Suppliers will also need to be able to justify why they are holding onto credit surpluses built up by a customer. The measures include tougher rules on doorstep sales, better information for customers via their energy bills and new annual statements on their energy use and how much it costs them each year. The package aims to offer protection for small businesses through curbing and controlling automatic roll-over of energy contracts.
Alistair Buchanan, CEO of Ofgem, said: “Direct debit is one of the cheapest ways to pay for energy and we are concerned that if customers cannot clearly understand how their payment plan works they will lose confidence. The proposed licence condition will help give customers peace of mind that the amount they are being asked to pay is based on their likely energy use. It will help ensure suppliers are more transparent about how they calculate payments.”
Ofgem has said that the new supply licence conditions banning unjustified price differences will come into force on September 1 2009.
