Energy companies hoard £9bn of customers' cash
Energy companies have hoarded £9 billion of customers’ money this winter - more than four times the sum previously calculated, the Telegraph can disclose.
The cash pile ballooned over the last year to peak at the end of November, a time when the cost of living crisis was placing household budgets under extreme pressure.
The Telegraph has previously revealed that gas and electricity companies have been increasing direct debit payments from customers, even for those who are already substantially in credit.
Previous figures showed that the energy companies had amassed around £2 billion of customers’ cash.
The revelation that energy companies had amassed £9.013 billion by November 30 last year was disclosed to the Telegraph under Freedom of Information laws and has sparked questions about whether energy companies are amassing too much.
Ofgem, the energy watchdog, defended the amount of money the firms had collected, saying that suppliers had helped customers to “manage bills”.
A spokesman said: “Suppliers help customers to build up a credit balance through the pricey winter months, and this information today is recorded at the very peak of that activity – ultimately helping customers manage bills.”
Bills have nearly doubled
Gas and electricity bills have nearly doubled since October 2021, as the war in Ukraine forced up gas prices, and they are set to reach £3,000 by April. The true cost to households would be even higher, but is being held down by government support.
Energy firms often collect more money than needed from customers during the summer, when energy usage is low, so that there is a large reserve of cash to use up during the winter months.
However, concerns have been growing that energy firms are taking too much money from customers in advance, and are using it to help fund their own operations – something Ofgem permits.
On Thursday night, Christine Farnish, a former Ofgem board member, said: “It would appear that firms are collecting more than they absolutely need, based on the worst-case scenario.”
Ofgem sources claim the new figure cannot be compared with previously published figures on a like-for-like basis and said the regulator had not uncovered any evidence that energy firms were hoarding cash unfairly.
However, Ofgem figures show that nearly one million energy customers had their direct debits more than doubled between February and April last year – even before the energy crisis began to take hold.
Debit payments hiked ahead of winter
In December, the Telegraph also found evidence that customers who were more than a thousand pounds in credit were having their direct debit payments hiked as they headed into the cold winter months.
It comes after the Times found debt collectors working on behalf of British Gas breaking into customers’ homes and force-fitting pay-as-you-go meters.
The chief executive of Centrica, which owns British Gas, said there was “nothing to be said to excuse” what happened. On Thursday, the firm suspended installations of pre-payment meters, as did EDF and Scottish Power.
Centrica has previously said that it ring-fences customers’ money and does not use it to fund its day-to-day operations.
Ofgem has been under pressure to force other firms to follow suit, in order to ensure customers' money is protected in the event that energy firms go bust.
At the moment, households that have built up large credit balances have their money protected, but the cost of doing so is shared among all customers, hiking up bills for everyone.
Ofgem has resisted calls for a ban on firms using customers' money as working capital. Instead the regulator said it will ask firms to report their customer credit balances each month, or if they exceed half of the company’s total assets – at which point the watchdog may step in and ask them to take measures to protect it.
An Ofgem spokesman said: “Protecting consumers is always our top priority- and we do encourage suppliers to help customers spread the cost of the more expensive winter months over a full year’s billing, to help customers manage their payments and avoid slipping into debt. Customers can always request their balance back at any time and we have made sure this is firmly in our rules.
“As a robust regulator, we are committed to take action against suppliers who fail their customers, and this includes the failure to refund credit balances.”