The energy regulator has called out five of the country’s biggest household energy suppliers for their treatment of customers amid complaints of unjustified direct debit levels.
Ofgem launched a compliance review in May after the business secretary Kwasi Kwarteng complained that “some” companies had been increasing direct debit payments “beyond what is required” following the energy price shock linked to the war in Ukraine.
The issue came to a head in March, ahead of the near-£700 hike in the price cap, when the consumer campaigner Martin Lewis told MPs that some companies had doubled direct debits in some cases in a bid to improve their cash flow.
Ofgem said on Wednesday that Ecotricity, Good Energy, Green Energy UK, Utilita Energy and TruEnergy had been found to have moderate to severe weaknesses or failings in their handling of direct debit customers.
Another firm, UK Energy Incubator Hub, was also placed in this category but the watchdog said it was no longer trading.
Ofgem said that the active suppliers had now been required to take “immediate and urgent action” including repayments if needed, and to consider whether goodwill payments were warranted.
The problems ranged, it said, from inadequately documented or embedded processes, weak governance and controls, to an overall lack of a structured approach to setting customer direct debits.
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It declared that these issues could lead to direct debits being set incorrectly or not being evaluated for a long time.
The review found that, on average, direct debit levels for customers on a standard variable tariff (SVT) between February and April increased by 62% – mostly reflecting the increased cost of wholesale gas.
The study showed that 8% (500,000 households) saw rises above 100% which “concerned” the regulator.
Out of a total of 17 large suppliers in the market, the majority were found to only have minor failings.
The regulator said there were no major concerns over direct debit operations at British Gas, EDF, ScottishPower and SO Energy.
Those found to have minor weaknesses consisted of Bulb, E.ON, Octopus Energy, Outfox the Market, Ovo, Shell and Utility Warehouse.
