Energy Company Charges

Alok Sharma Excerpts

Tuesday 4th February 2014 Commons Chamber

[Robert Halfon]

I am proud to call my hon. Friend a friend and I appreciate his remarks.

It is no secret that consumers are feeling hard pressed. The cost of utility bills has gone up exponentially in the past three years. Since 2007, the average electricity bill has gone up by 20% in real terms and gas bills have gone up by a shocking 43%, proving that they are a major burden on the cost of living. Citizens Advice has warned that energy bills are rising at up to eight times the rate of earnings. It is no surprise that polling shows that the rising cost of energy bills is a top concern for the British public.

I welcome the efforts that the Minister and the Government have made to help, including by forcing companies to put consumers on the lowest possible tariff, providing a rebate to every domestic electricity customer, reducing bills by £130 for 2 million of the poorest households and protecting pensioners’ cold weather payments. However, with price increases, companies making large profits and general dissatisfaction with energy companies across the United Kingdom, it is clear that the energy market is not working at its prime.

The payment of energy bills by direct debit is often associated with companies overestimating a household’s energy usage, resulting in overcharging and a large amount of credit being built up. Understandably, that upsets many customers and it has rightly received a lot of attention from the media.

[Alok Sharma (Reading West) (Con)]

My hon. Friend is a huge consumer champion, not just on this issue, but on many others. More power to his elbow. He makes a good point about the way in which direct debits work. They are not a panacea. Last week, I received an e-mail from my constituent, Mr Balfour, who told me that his 87-year-old father had built up a £1,400 credit because he was paying by direct debit. According to Ofgem, direct debits are meant to be set on a fair and reasonable basis. Does my hon. Friend share my view that we should define in more detail what “fair and reasonable” means?

[Robert Halfon]

My hon. Friend makes a hugely important point, and I suspect that the Minister will have more to say about it. I welcome the fact that the Government are forcing companies to compensate customers, such as his constituent, who have been mis-sold or overcharged. I know that the Department of Energy and Climate Change has asked Energy UK to set up direct debit best practice guidelines.

The problems associated with customers not paying their gas and electricity bills by direct debit have largely been ignored, even though it can end up costing consumers significantly more. Unlike the hon. Member for Ynys Môn, who has known about the problem for some time, I first became aware of it only a few weeks ago. A pensioner in my constituency told me that she had received a letter from Co-operative Energy saying that because she was not paying her bills by direct debit, she would be charged £63 a year extra. I could not believe it—I wondered how on earth such a thing could happen, given that she had gone to the post office religiously to pay on time. I thought, “That is a lot of money”, so on the Monday, I rang up Co-operative Energy and spoke to the general manager, who was very pleasant. He said, “Actually, ours is one of the lowest”. There I was thinking that £63 was a lot of money.

I decided to investigate every single energy company, and the results were shocking. Of the 26 companies that responded, five only allowed their customers to pay by direct debit and 17 charged their customers different rates depending on the method that they used to pay. Only four companies charged their consumers the same whether or not they paid by direct debit. In a euphemism extraordinaire, many of the companies that charged extra said not that they were adding a surcharge but that they were discounting the bills of people who used direct debit, because there were lower costs.