Call for cap on 'extortionate' fuel bill surcharges

http://www.bbc.co.uk/news/business-27509378

Version 0 of 1.

Pressure is mounting on energy suppliers to cut the amount they charge customers who do not pay their bills by direct debit.

Twelve million people currently pay an average surcharge of £80 a year if they pay quarterly, or via a pre-payment meter.

One MP said the amount was extortionate and should be capped at £24.

However the regulator, Ofgem, said there was no evidence that suppliers were over-charging their customers.

Nevertheless, it is planning a summit in a few weeks' time to discuss whether such charges are fair.

At the moment, customers will not find these charges mentioned on their bills.

Indeed, many consumers the BBC spoke to were unaware they are even paying them.

"£80? Is it really? I didn't know that," said one pensioner.

'Completely unnecessary'

The energy suppliers prefer to describe the payments as discounts for those who pay by direct debit.

But Robert Halfon, a Conservative MP who is leading a campaign, insists they do amount to a surcharge.

"This is not a discount for people who pay by direct debit. This is a premium on the 46% of the country who prefer to pay by direct debit," he told the BBC.

"It is an extortionate amount of money, and completely unnecessary," he said.

Of the big six suppliers, Npower charges the most - £94. However two smaller suppliers, Ecotricity and Green Star Energy make no charge at all.

Earlier this year First Utility cuts its charge from £96 to £24.

In his blog, "The Great Energy Rip-off", Robert Halfon also reports that many water companies charge £5 or less for a standard payment method.

Changes

The suppliers say the extra charges are to cover the cost of chasing up those who do not pay their bills on time, or who have to be pursued for non-payment.

The average £80 surcharge applies both to those who pay their individual bills quarterly, as well as to those who pay via a pre-payment meter.

"Companies provide a range of options to suit their customers," said a spokesperson for Energy UK, which represents the industry.

"Companies only charge customers more when their chosen payment method costs more to run," she said.

That assertion was backed by the regulator, Ofgem, this week, which demands that companies only charge what it actually costs them to collect the money.

"We found no evidence to suggest that costs are being unjustifiably added to the bills of typical prepayment and standard credit customers," Ofgem concluded.

Nevertheless, it is planning a round-table discussion with MPs and consumer bodies later this summer, to consider possible changes.

Tricky move

In a BBC interview, Rachel Fletcher, Ofgem's senior partner for markets, also conceded that surcharging is now a matter of public concern.

"A lot of questions are being asked about the fairness of these additional charges," she said.

"One of the things we want to do is to wrestle this issue to the ground," she added.

One option now being considered is to share the costs of debt collection with direct debit customers as well.

But while that might cut bills for 12 million consumers, frequently the poorest or most vulnerable, it would inevitably increase them for the 14 million direct debit payers.

And that would be a justifiable change perhaps, but a tricky move to advocate.