100,000 energy customers overcharged

by Robert Powell on 24 August 2011  |  13 comments
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Around 100,000 EDF Energy customers have been overcharged after a problem with the company's telephone meter reading system...

There are several nuggets of wisdom lurking in the board game Monopoly. The benefits of investing in property for instance; or the importance of keeping an emergency cash fund. Or perhaps even – at a push – the perks of free parking.

But one apt message that you may not have noticed is the proximity of the electric company to the jail. And before you all go searching for a photo of the Monopoly board, here’s a link to one.

Yes, in just the last three months we’ve seen Scottish and Southern Energy prosecuted for dishonest sales techniques, as well as British Gas fined £2.5m over customer complaints. And all of this has been going on as energy companies continue to hike rates.

Granted, none of these misdemeanours may be worthy of jail time. But in my book, they’re still criminal.

And it gets worse...

Seven-year glitch

EDF Energy is the latest utilities provider to admit failings. The company said that some 100,000 customers had been overcharged due to a seven-year fault on the automated telephone meter reading system.

£200,000 of overcharging occurred in total, with one customer shelling out £500 more than they should have. EDF confirmed that all customers affected would be reimbursed with interest.

Existing EDF customers will receive a credit on their account by 30 September while those who are no longer with the provider will receive a letter with details of how to claim back their cash. EDF says it will send this letter to the customer addresses it still has on file.

The meter-reading glitch caused customers to be charged for energy usage before price rises at the new higher rate. The problems took place between October 2003 and May 2010.

EDF said that a majority of the excess charges involved amounts of less than £5 and that customers who gave a meter reading to an adviser over the phone would not be affected.

EDF have apologised profusely for the mistake and said that as soon as the glitch was identified, corrective action was taken.

However, if further reports are to be believed, this practice of overcharging may not be confined to just EDF Energy...

Separated rates

Last week Ofgem demanded that energy companies fully explain how they calculate bills that run over price increases. The energy regulator is worried that providers may be regularly applying increased tariffs to too much of a bill.

Utilities companies must now separate out energy usage volumes and costs, before and after any price hike.

Appropriately, Ofgem’s announcement came on the day that British Gas put up its gas prices by 18% and electricity rates by 16%. So if you’re a customer of the Centrica-owned utilities giant, your next bill should be apportioned out over the lower and increased rate periods.

Indeed, every member of the ‘big six’ group of energy companies has upped their rates since January, making the scope for potential overcharging huge.

Clear billing

Looking at the bigger picture, these overcharging errors are only a small part of a far bigger problem that has plagued energy companies for years. Namely, overly complex, unclear and ambiguous billing practices.

In fact, Ofgem highlighted the problem in a March review, pointing out that tariffs were too complex and hence hindered customers looking to compare deals and shift suppliers. But indeed it seems – as my colleague Neil Faulkner pointed out back earlier this year – that the regulator’s proposals were too weak and empty to make any noticeable difference.

A sterner approach needs to be taken with the six major energy providers, who between them hold a virtual-monopoly on the utilities industry. And we may just get that stern approach when a forensic group of accountants begins probing the ‘big six’ in the next few months...

Forensic investigation

Despite a distinct lack of teeth within a majority of its March proposals, Ofgem has come good on one promise. The regulator has this week appointed a specialist team from the accountancy firm BDO to conduct a forensic investigation into the pricing practices of Britain’s major energy suppliers.

The team will look into the accusation that utilities companies underestimate their level of profits in order to justify higher prices. The trading profits, wholesale prices and hedging practices of every member of the ‘big six’ will be analysed with the investigation predicted to report before the end of the year.

Indeed, if the team does come back with some evidence against the energy firms, it may provide some respite for beleaguered Brits who have been hit with round after round of price hikes over the last nine months.

Relentless price hikes

British Gas has upped rates twice since December 2010, despite its residential business making £740m of profits in the last year.

And last week, nPower became the latest provider to hike prices – raising gas and electricity rates by 15.7% and 7.2% respectively. The increase is likely to provoke outrage among customers, not least because back in June the company announced a fantastic set of half-year results with profits more than doubling.

All of the energy providers blamed the price rises on an increase in wholesale costs. However Ofgem claims it has evidence to show that these price hikes were pushed through far more quickly on the back of rising wholesale costs than price reductions were when costs fell.

And indeed, with profits gushing into utilities companies at their current rate, it’s not surprising that the regulator has begun to smell something fishy.

Energy providers have been passing go and collecting their £200 unchallenged for far too long now. It’s time for them to be held to account, so that maybe next time they pass through the jail, they will not be just visiting.

Your experiences

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