Energy Suppliers: Customer Credit

Amanda Solloway Excerpts

Wednesday 22nd February 2023 Westminster Hall

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)]

It is a pleasure to be here. I thank the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) for securing the debate and for meeting me yesterday to discuss the matter. That was important for me, because I am new in the role and it is important to have our eyes wide open when we take such a role on. I want to make it clear that the customer has to be at the heart of all we do. If there is any point to which I am unable to respond, given my newness in the role, I am happy to write to hon. Members.

The Government welcome steps to increase customer awareness and engagement. We believe that energy suppliers need to ensure, now more than ever, that customers do not build up large credit balances. Suppliers should not be sitting on money that is not needed to pay for the energy that a customer is using. An account might move between credit and debit over the course of a year, in line with energy demand, but accounts should not build up an excessive credit balance. I concur with the hon. Member: it is the customers’ money.

The Secretary of State for Energy Security and Net Zero wrote to the energy suppliers in November and urged them to ensure that their IT systems are more responsive to changes. I note the point about the app; I had not heard about that, but we will look into it. The Secretary of State called on suppliers to ensure that direct debits are more accurate and that customers do not end up with large credit balances on their accounts. He has also urged Ofgem to ensure that suppliers are complying with the rules.

Ofgem requires energy suppliers to review their customers’ direct debit arrangements at least once a year. Most review them twice a year. As the hon. Member for Inverness, Nairn, Badenoch and Strathspey has mentioned and has noted in his campaign, it is important to have accurate and regular meter readings. That is easily done by having a smart meter fitted so that readings are sent automatically to the supplier and stored electronically. I note, and will look into, the comments about smart meters not always being fit for purpose.

With the combination of a smart meter and an online account, customers and suppliers both have an accurate and up-to-date record of energy usage to hand. That is one of the most effective ways of ensuring that direct debits are at the right level, but I note the examples of customers not finding it to be the easiest of things. I have been reflecting on my father, who will not like my admitting to his age of 88; it is certainly a problem for older customers and others who will not necessarily have access to the app or the IT, so I will look at that. Elderly customers and those who are less able to engage have a dedicated helpline run by the supplier or the citizens advice bureau. However, I understand from my conversation yesterday with the hon. Member for Inverness, Nairn, Badenoch and Strathspey that customers might not always know that, so we need to look into that.

In August 2022, Ofgem changed the licence conditions on suppliers to ensure that direct debits are based on the best and most current information available in all cases. The tightening of the licence conditions should reduce the likelihood of suppliers accruing excessive credit balances. Ofgem requires suppliers to explain the reasons for any changes that they make to a customer’s direct debit arrangement and to inform them of any change at least 10 days in advance. A customer may challenge a proposed increase and ask for a revised level. However, as has been acknowledged in today’s discussion, that option is not always readily available and the customer may not always recognise that it is there, so we need to reach out to ensure that they know how to ask for it.

A customer can ask their supplier to refund a credit balance at any time. Suppliers must do so promptly. If a supplier refuses to give the customer a refund, it must explain why it is unable to do so. If the customer is not happy with the situation, they should lodge a complaint with the supplier. I am aware that there are often complaints about suppliers increasing direct debit amounts; I have said as much to the Secretary of State, who has urged improvement. We must ensure that refusal by suppliers is not allowed. My understanding is that suppliers have so far not refused to refund a credit balance. I discussed the matter yesterday with the hon. Member for Inverness, Nairn, Badenoch and Strathspey, but I am happy to look into it more fully.

If a customer remains unhappy with the outcome of their complaint to their supplier, they can reach out to the energy ombudsman. Ombudsman Services, an independent body that provides dispute resolution and is free for customers, can investigate and where appropriate oblige the supplier to rectify the situation. Customers can also contact their supplier at any time to request a review of their direct debit arrangement. The review should be based on their annual consumption, using actual data or, where that is not available, estimated data. Customers can often change the direct debit themselves via the supplier’s website, over the phone or via their bank. However, it is much better for the supplier to get it right in the first instance, and that is what I want to see.

As has been acknowledged, the advantage for customers of paying for energy with a fixed direct debit or standing order is that they pay the supplier the same amount at regular intervals—usually monthly—irrespective of how much energy they have consumed. Customers typically build up a credit balance on their account over spring and summer because they use less energy for heating during those warmer periods. The credit balance is then drawn on during the colder autumn and winter periods, when more energy is consumed. Actual energy use will vary and is dependent on weather conditions. We must be mindful that this is the customer’s money we are talking about.

[Drew Hendry]

It is important to clarify one thing. There is no dispute that energy suppliers, if pushed, will return credit balances, but “if pushed” are the active words. Many of my constituents have told me that there are sometimes barriers to getting their money back. “You don’t want to do that, do you? You should really take a smaller amount”—that is the message. As I commented earlier, Ofgem seems to be missing on the issue.

[Amanda Solloway]

I noticed that point in the hon. Gentleman’s speech. Maybe we should look at whether there could be some automatic repayment. I believe that that has been looked into before, but I am certainly prepared to do so and to give an assurance on that.

[Alan Brown]

Everybody here welcomes what the Minister says about looking at automatic refunds. As my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) said, Ofgem does not currently require refund requests to be processed within a specific time. It is only if a customer closes their account to switch that there are stipulations on the time period in which their credit must be returned. The issue in the short term is that the companies are not obliged to keep to a timescale to return the credit, so I welcome the Minister’s comments about automatic refunds.

[Amanda Solloway]

I thank the hon. Member. This is an important debate, not only because it is on an important topic, but because it is important for me to listen and understand the issues.

Ofgem recently provided a progress update. It has opened formal compliance engagement with 12 suppliers and has required them to submit remedial action plans to address its concerns. To date, Ofgem has satisfactorily resolved 95% of the concerns and has secured several supplier improvements in relation to policies, processes and controls, credit balance arrangements and staff training.

Ofgem has proposed further measures to protect consumer credit balances. The reforms would require suppliers to have enough working capital to run without needing to rely on customer credit balances, about which concern has been illustrated today. The reforms should further ensure that suppliers do not gain a financial advantage from holding credit balances. Ofgem’s reforms will mean that when an energy supplier fails and Ofgem’s safety net quickly moves the customers to a new energy supplier, the customer credit balances with the failed supplier are limited in size and can, where necessary, be ringfenced.

I was unaware of the problem with smart meters, which I will certainly look into. I mentioned the app problem; I was unaware that there was an inconsistency between the reports from the app and from the website, but I am happy to look into that.

Once again, I thank the hon. Member for Inverness, Nairn, Badenoch and Strathspey for securing the debate and for his campaign to encourage customers to take more control over their energy account balances. I also thank him for noting that we must ensure that we are as helpful as possible. Customers must be at the heart of this, because it is the consumer who is affected.

The Government and Ofgem are taking clear and firm action to ensure that customers are treated fairly, are protected and receive good service. The Energy Security Secretary has written to energy suppliers about the importance of setting direct debit payments more accurately. He has also made it clear that protecting consumers is a top priority for this Government. Finally, one of the early meetings that I will have in my new role will be with the Ofgem CEO. I shall press him on what can be done to ensure that customers get their money back swiftly and easily, and to prevent suppliers from building up consumer credit balances.