Householders are being warned to avoid the sneaky tricks that utility suppliers use to keep hold of customers’ cash. They include doubling direct debit payments, even when accounts are in the black, and not refunding customers who are in credit when they switch supplier. 

Many utility providers also take money upfront from new switchers – before any energy has been consumed. Marketing ploys also encourage customers to keep their accounts in credit by paying interest on positive balances. 

The warning comes as figures show that suppliers have paid a staggering £38million in redress to customers through intervention by energy regulator Ofgem this year. About £14million relates to problems with bills or customers wrongly being blocked from switching. 

In the spotlight: Energy suppliers have paid a staggering £38m in redress to customers through intervention by energy regulator Ofgem this year

In the spotlight: Energy suppliers have paid a staggering £38m in redress to customers through intervention by energy regulator Ofgem this year

In the spotlight: Energy suppliers have paid a staggering £38m in redress to customers through intervention by energy regulator Ofgem this year

Energy providers have stumped up an additional £26.5 million in fines – the highest penalty total in a decade. It takes the overall bill for wrongdoing this year to nearly £65million – the highest since 2015. 

Some industry experts believe suppliers will be keener than ever to hoard customers’ overpayments. Andrew Long is chief executive of Switchcraft, an auto-switching service that moves customers on to cheaper energy deals on their behalf. 

He says: ‘We’ve identified several sneaky tactics being used to hang on to customers’ money.’ 

The tactic most employed is the ratcheting-up of direct debit payments – sometimes by 100 per cent, even if a customer’s account is in credit. 

Direct debits are a way to automate energy payments over the course of a year. If the monthly sums aren’t likely to cover a year’s energy costs, suppliers sensibly winch the direct debit higher. But Long says this system is sometimes cynically used to bring in more money for suppliers. It has also been used as a last-ditch effort by struggling suppliers to obtain cash before going bust. 

Recently, Switchcraft has seen widespread evidence of suppliers doubling monthly payments. 

Long says: ‘With some customers understandably behind on their bills with the pandemic, I wouldn’t be surprised if more suppliers quietly bump up direct debit payment demands. Households should check that their direct debit payment matches their energy usage. 

‘They should also insist that their supplier refunds any credit balances straight away.’

Could you be billed for energy you haven’t used? 

Changing supplier is usually the quickest way to trim energy bills. But more than a dozen suppliers charge money upfront on day one of a contract – while some will even demand money before they have taken over supply of a customer’s account. 

Suppliers that charge up-front claim they do so to buy energy in advance at a cheaper rate. But not every customer will be happy to pay for energy they haven’t yet used. Meanwhile, for those who switch away while still in credit to their former supplier, getting money back can be painstaking. Complaints on review websites show this problem still exists despite Ofgem’s best efforts to root out this bad practice. 

One customer says it took two years to retrieve £200. Another complains of a six-month wait for a £136 refund. Suppliers are obliged to pay £30 compensation to customers left frustrated by this experience. 

Ofgem introduced a new rule in May last year, stipulating that credit balances must be refunded within ten days of a final bill being produced. Tens of thousands of households have been awarded this compensation since.

Jonathan Lenton, head of regulatory affairs at the Energy Ombudsman, which settles disputes between suppliers and customers, says: ‘We continue to see complaints about delays in credit refunds. Just as customers must pay for energy they have used, we think it’s important that customers who are in credit receive refunds in a timely manner.’ 

Customers should also be cautious about dubious sounding rewards such as interest credited to accounts with positive balances.

Igloo energy pays 3 per cent on positive balances, while Ovo gives between 3 and 5 per cent. They do this because it is cheaper than borrowing money via the wholesale markets. Though the rates are much better than high street savings rates, money is not protected in the same way as bank savings where protection is provided by the Financial Services Compensation Scheme. 

The rates can distract customers from seeking cheaper energy deals. In most cases, a lower tariff and lesser monthly payments will prove more rewarding than any interest earned on a credit balance. 

The same is true of cash offers used to convince switchers to stay. Anyone tempted should check it is worth more than the savings made from switching. 

A cheap quote for gas and electricity from a new supplier might appear attractive, but a quote and reality can be wildly different. 

A comparison between deals can only be trusted if based on how much energy a household truly uses. But it is standard for suppliers and price comparison websites to offer quotes based on estimates if a customer doesn’t provide real figures.

People often sign up, only to see their direct debit jump later. This happens once the new supplier sees the household’s real usage. 

For some, it can come as a shock. Retired manager Charles, 73, who does not wish to share his surname, was recently quoted a cheaper energy deal by M&S Energy for his two-bedroom bungalow in the North East of England. 

The £78-a-month deal was lower than Charles was paying his existing supplier and he signed up. But the quote was based on estimated usage and not on his real previous bills, which Charles did not have to hand at the time. 

Within two months, the direct debit had shot up to £148. 

He says: ‘It was nearly double what I was first told and £17 per month more than my previous supplier.’ 

M&S Energy, run by Octopus Energy, says the quote was based on a ‘fair’ estimate but it says Charles uses more energy than average for a home of his size. 

It has made a £30 ‘goodwill’ payment to Charles, but he has decided to move back to his former supplier. He believes suppliers should demand accurate data before any switch is finalised. 

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This post first appeared on Dailymail.co.uk

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