An estimated 12 million individuals are currently being obligated to pay an average surcharge of £80 per annum if they pay their energy bills via pre-payment meter or on a quarterly basis which does not involve a direct debit scheme.
One MP argued that the amount of money being charged by energy companies on surcharges is extortionate and a cap should be considered in the future which limits the amount that can be charged to just £24 a year.
However, the industry watchdog, Ofgem, has denied that overcharging is a major problem in the energy sector citing that there is little evidence available at present to support the theory that surcharges are being applied to consumer bills excessively.
Nevertheless, they revealed that they are currently in the process of setting up a summit in the upcoming weeks so that they can consult with industry experts about whether the value of the charges are fair for customers or not.
At present, consumers will see no mention of these surcharges on their bills, as they are automatically added before it is sent out. In certain cases, bill payers have identified that they were actually unaware they were paying the charge at all.
“£80? Is it really? I didn’t know that,” said one pensioner.
Instead of clearly explaining the surcharges and elaborating on why they are applied and how much they equate to, energy providers have instead opted to portray the charges as a bonus discount for customers who pay their energy bills by direct debit.
But Robert Halfon, a Conservative MP who is playing a leading role in parliament to tackle the issue, has argued that the entire basis of the surcharge is flawed because it only benefits one party; energy providers.
“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 country’s ‘big six’ energy providers, Npower were identified as the organisation who charged their customers the largest annual surcharge with official figures estimating that the average Npower customers pays £94 each year if they are not on a direct debit scheme.
This contrasts hugely with the equivalent figure displayed by some of the country’s smaller providers, such as Ecotricity and First Utility, who both charge £0 and £24 respectively. First Utility’s surcharge stood at £96 on average earlier this year but was slashed during the winter as the small providers of the country continue with their collective initiative to introduce greater levels of competition into the energy market and orientate it toward the consumer again, after years of it seeming otherwise.
Energy providers have defended the surcharges arguing that they charge more for customers not on a direct debit scheme in order to cover the potential costs of chasing up late payments or non-payments.
The industry average £80 surcharge is currently applicable to people who pay their energy bills on a quarterly basis or with a pre-payment meter.
“Companies provide a range of options to suit their customers,” said a spokesperson for Energy UK, a key representative of the sector.
“Companies only charge customers more when their chosen payment method costs more to run,” she said.
This notion was backed by industry watchdog, Ofgem, which urged energy companies to only apply surcharges that accurately reflect the true costs of chasing up late payments.
“We found no evidence to suggest that costs are being unjustifiably added to the bills of typical prepayment and standard credit customers,” Ofgem concluded.
‘Wrestle the issue’
Rachel Fletcher, Ofgem’s senior partner for markets, accepted that the issue of surcharges has risen in importance in recent times and pledged to ‘wrestle the issue to the ground’ in order to bring a swift resolution to the problem.
“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 compelling idea that is currently being forwarded to address the issue is to split the costs of collecting late payment with direct debit bill payers, though this somewhat utopian idea would only benefit an estimated 12 million energy consumers whilst raising the bills for 14 million across the UK who currently pay by direct debit.
And whilst the socialist aspect of this idea is hugely attractive in theory, it would be supremely difficult to put into practice considering that it would affect the finances of many middle income household’s who pay their energy bills via direct debit and would necessitate a degree of altruism that simply does not exist anymore universally after years of neo-liberal economics.Source; MoneyExpert