Bad behaviour amongst energy suppliers. Who would credit it . . .

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OFGEM has provided qualified support to the establishment of the My Energy Credit website which has been set up by the Big Six energy suppliers to provide the means for consumers that have switched whilst still in credit with their old supplier to ensure that they are paid their money back. It is a somewhat sad indictment of the energy industry as a whole that we are welcoming the act of giving people their own money back as some kind of consumer victory. There should never have been the need for this site to even exist. There is an obligation on energy suppliers to refund any overpayments made by their customers.

Consumers do not exist to act as a source of free credit through which energy suppliers get to fund their cash-flow and operating costs. This is even more the case when the consumer has exercised their choice to leave that supplier and place their business elsewhere. As with many elements of the energy supply industry I am minded of how I believe parking meter fines work when it comes to their consumer focus. It is my hypothesis that parking fines/bus lane fines and other traffic civil enforcement cash generative activities operate under the assumption that if they make it is difficult as possible to challenge the fine then the overwhelming majority of fine recipients, even if they believe themselves innocent or wrongly targeted, simply don’t have the will to navigate the bureaucracy necessary to get the fine overturned. In short they simply pay the fine as a way to avoid having to engage with an adversarial council intent on protecting its revenue stream. Similarly much of this cash is sitting in supplier bank accounts because they made it virtually impossible for the consumer to know it existed in the first place let alone get it back and certainly made no particularly vigorous efforts to return the funds voluntarily.

It has to be said that there is no empirical evidence that the Big Six are statistically any worse than other suppliers in this regard but given that the direction of travel in the switching world is either Big Six to Big Six or Big Six to new entrant it stands to reason that in the preponderance of occasions where this problem manifests itself it is a Big Six supplier sitting on the cash. Having gone to the www.myenergycredit.com website myself I must say that it is unlikely to win any prizes at the next User Experience web awards ceremony. It is effectively a collection of links to the relevant pages on the supplier websites with no independent consumer commentary regarding the issue in question and what options are open to the consumer if they get no joy from the supplier directly.

Interestingly whilst OFGEM are on top of this particular issue there is substantially less intervention and commentary where suppliers have been guilty of utilising a direct debit amount that is simply too small to cover the consumption used by an individual householder. At first glance you may well ask yourself what the problem with this is – surely this works in the consumer’s favour? Unfortunately this is a naïve interpretation of the position. The cost of cash right now is two parts of not very much if you are highly credit worthy as a supplier. Conversely having that money sitting in your bank account instead of in theirs is earning you a whopping 0.5% annualised – if you’re lucky. However when you come to switch – if that is something you wish to do – then at that juncture the full amount will become due. So a £30 a month under-recovery over a year is going to leave you with a £360 plus one month’s energy final bill for settlement. Many householders don’t have the flex in their budgets to be able to cover this shortfall and as a result their switch founders on the rocks of a cash flow hit they can’t afford. As if by magic the existing supplier will hove into view like some kind of omnipotent benefactor and agree a payment plan with the consumer; if they commit to another year or so with the supplier. So in this way a barrier to switching is introduced into the mix. Indeed; where meter reading and billing amounts are based upon estimates then getting it wrong in either direction produces a switching barrier. And who stands to benefit from the existence of switching barriers? Would the incumbent supplier, the one that got the direct debit amounts wrong in the first place, please stand up.

I would like to hope that this is an extremely cynical view of behaviour that hasn’t manifested itself in any kind formalised strategy nor is backed up by statistics; although after 14 odd years of dubious supplier behaviour and a litany of fines cynicism is hard to avoid. What can be stated with some certainty is that as long as BoE interest rates remain at their current levels then suppliers have no obvious incentive one way or the other to get the meter reading and therefore the direct debit or quarterly bill financially accurate. Roll on smart meters – then at least we will be able to consign this particular barrier to switching to history.

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