Energy Suppliers: Customer Credit

Patrick Grady Excerpts

Wednesday 22nd February 2023 Westminster Hall

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

I beg to move,

That this House has considered regulation of customer credit retained by energy suppliers.

It is a pleasure to serve under your chairmanship, Mr Betts. In this debate, I am not going to focus on what I have focused on many times in the Chamber, which is the myriad failures of the UK Government in dealing with the energy cost crisis for people in their homes and the cost of living crisis. That is well documented, and it was underlined by a poll yesterday showing that nearly 70% of people across the nations of the UK feel that the Government are failing on this. That is not what this debate is about. The issue that I want to highlight is something that affects many people in their homes and is manifestly unjust.

I want to start by saying that I am grateful to the Minister for graciously taking the time to discuss this with me before the debate; it says a lot that she was willing to be informed about the perspective that I want to bring to this. I am hopeful that she will work with us to try to sort this and that we will be able to work together to aid people.

I have been asked to feel sorry for energy suppliers. I have been asked by energy suppliers to think of them and their financial position, as they are keeping customers’ money in their bank accounts that they are not due through bills because it aids their business. I do not feel sorry for energy companies. I cannot imagine any other industry where companies are allowed to keep customers’ money without any accountability and think that that is okay or, indeed, that we should feel for them. I understand their wish to protect themselves. For example, Octopus told me that it holds £660 million of customers’ money in credit, but because of the outstanding balances, only £150 million of that is a cushion for them. I am sorry, but that does not cut it—it is not the company’s money to do that with.

I am more concerned about people facing the fear of the cost of living crisis. I am more concerned about people’s frustration over their household incomes and the hardship that they are expected to face in these times. People are turning off appliances and heating when it is cold to save money, because that is what they have been told they have to do, when all the time, energy companies are keeping vast amounts of their money in their bank accounts while people struggle.

[Patrick Grady (Glasgow North) (SNP)]

I congratulate my hon. Friend on securing the debate. Does this not speak to a need for wholesale reform of how people are charged for and pay for their electricity? He is right that customers who pay by direct debit build up significant credit balances, and the energy companies can earn interest on that, but customers who pay by prepayment meters are paying up front for energy that they have not used, and they often pay a higher premium and higher standing charges. The people who can least afford it, which is often customers on prepayment meters, are paying the most. This is another injustice that has to be resolved.

[Drew Hendry]

My hon. Friend is exactly right. It speaks to the way the cards are stacked against consumers and users in favour of the energy companies. The position that people find themselves in does not seem to be met with any sympathy across the industry—it is just a fact of life; they are collateral in the game of business. That is not the way we should look at people. As I said, people are turning appliances off even when they are in credit with the energy companies.

[Drew Hendry]

The hon. Lady is absolutely right. I will spend a bit of time later talking about Ofgem and powers that the Government might take forward in relation to working with Ofgem.

As I said, people are turning things off even when they are in credit. I believe every Member of this House should be more concerned that the property of customers of energy companies is being held hostage, without the explicit permission of those customers; the money does not belong to the energy companies. Things should and must change.

I started this campaign in January. By coincidence, Alex Lawson, a Guardian journalist, did some research into the subject and uncovered the fact that

“suppliers had hoarded an estimated £9 billion of customer cash by November last year”.

In his investigation, he pointed out that Centrica had £400 million of customer deposits; Octopus Energy had £660 million; and E.ON, OVO Energy, EDF and ScottishPower refused to say how much money they had from customers whose accounts were in credit. It is not the energy companies’ money.

I contacted the suppliers in preparation for the debate. The response I received from Utilita about high credit balances defended its customer service and the way it looks after its customers, but I was struck by a paragraph in which it said:

“Other companies such as Ovo, Octopus and Bulb have significant customer credit balances in their accounts. Indeed Octopus recently published its accounts for the year ending March 2022 in which it shows £221 million—strange to have such high credit balances at the end of winter! Perhaps their ‘innovative practices’ are not working as intended. The article by George Nixon that appeared in the Times on Saturday 28th January 2023, ‘How to get your money back from your energy supplier’ mentioned virtually all the larger suppliers (all of which had either minor or no weaknesses in their direct debit processes according to Ofgem).”

I am not giving Utilita a free pass, but it is telling that it is willing to make that comment.

In the highlands and islands, a great number of people subscribe to what used to be called the hydro board. When Scottish and Southern Electricity Networks took that over, many accounts simply transferred, and OVO Energy recently took over all those accounts. Because of that, I may receive a particularly high number of complaints about practices at OVO, so I state that at the outset. At the start of the pandemic, OVO received an £8.9 million fine for communication and billing issues. As mentioned, OVO has declined to give an average customer credit balance. Again I state: that is not its money and it is refusing to tell us how much it has.

My inbox shows that constituents’ problems with OVO are manifest regarding billing and metering. I have picked a sample of messages from people who have come to me, one of whom has allowed me to use their name and details, for which I am grateful. To get through to OVO, many of my constituents have had to spend up to

“4.5 hours on hold on the telephone.”

This is a company that says there are simple things people can do to sort their accounts.

OVO will not send some customers monthly bills, insisting that “Total Heating with Total Control” bills are provided quarterly. One constituent received three bills in one month: one showed that they owed £680, which they paid; one showed £300 in credit; and another in the same month said that they owed £1,000. I will return to this issue, because it is an important factor in the way these companies work with people’s money. They have consistently failed to fix faulty meters, with 18 months of changed dates and timeframes in one case.

The constituent I mentioned, to whom I am very grateful, is Mrs Frances Raw, who is a widow on a state pension. The Minister will be aware that the state pension is £611.64 per month. She has been asked to pay more than £236 a month, and the company wants to raise her direct debit. It thinks that she is going to use more energy, which is the justification for putting up her direct debit, but Mrs Raw is sitting on a credit balance of £1,796.36.

By any measure, it is a disgrace to put somebody under that kind of pressure. It is a failure in a duty to care, and a failure to do good business; and it is a failure that it is not being properly regulated, as we need to prevent that happening to people such as Mrs Raw. She has been brave enough to allow me to use her name, and I thank her one more time. I know how difficult it is for constituents to come forward and say they have an issue, and that it is okay to talk about it. It is very rare for people to do that, and I am extremely grateful to her.

Mrs Raw’s problems do not stop there. OVO keeps delaying changing her Total Heating with Total Control meter as well. This is destined to continue. I met Mrs Raw and she asked me if it would be possible to get some of her money back. I said, “No, Mrs Raw, you are entitled to all of your money back.” That is what everybody should get in these circumstances. It should not be a matter of someone begging to get their money back; it should happen automatically.

[Patrick Grady]

I thank my hon. Friend for giving way. The £,1000 or more credit balance on his constituent’s account is not just sitting there doing nothing. It is sitting in a company’s bank account earning interest, and contributing to the profits of that company. I wonder how the companies would feel if they were required to apply interest to customers’ credit accounts. Perhaps they would suddenly be incentivised to support the customers.

[Drew Hendry]

My hon. Friend makes a terrific point, which has been running through my mind. When these companies hold customers’ money, they are using it for whatever purpose they might have, rather than the customers being able to earn interest or pay their bills. These companies may well be using it for gaining their own interest. Some people might consider that theft. Some people might consider that using other people’s money to benefit themselves, without the permission of the people who own the money. That is not good enough. It is not their money; it is the customers’ money and it belongs with them.

--- Later in debate ---

[Patrick Grady (Glasgow North) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Betts. I am grateful to be called at relatively short notice. I echo a lot of what my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) has said and I congratulate him on securing the debate.

Many people nowadays are used to paying subscription models for services or products, for mobile phones or the use of the gym, or for online streaming services, but, by and large, what you pay for is what you get. The energy model is slightly more uncommon.

Of course it is very helpful for customers’ budgeting and planning to know that if they are on a direct debit and paying into that model, a regular amount will come out of their bank account over the course of the year. Yes, perhaps there will be a small credit balance, because generally energy usage during the summer will be slightly less than during the winter, but over the course of the year we would expect that to balance out. But what my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey has demonstrated—and what many of our own inboxes will demonstrate as customers start to pay close attention to their bills because of the high cost of energy and the other increasing costs of living—is that people are starting to discover a very significant failure in that model. Perhaps, as the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) has suggested, they are even discovering failures more widely in the energy market and system as a whole.

What is particularly disappointing is the number of issues that people seem to be having with their smart meters. By the sound of things, several of us here have personal experience of these matters, let alone the cases that come to our surgeries and our inboxes. Smart meters were supposed to make all these issues a thing of the past; people would know exactly what their usage was and would pay exactly for what they had used, and as a result would be incentivised to be more efficient with their energy use, which is better for their own personal finances—and, of course, much better for the environment, if we can reduce energy consumption and emissions.

Instead, people are getting readings that make no sense—that do not appear to match with their own perceived usage, at least—and the energy companies, for whatever reason, are using the opportunity to adjust direct debits, sometimes without any say-so; people sign up in advance for an adjustment of a direct debit and suddenly find that it has gone up, or maybe gone down. That negates the whole point of smart meters enabling them to budget. Smart meters were supposed to avoid such problems entirely, but in fact those problems seem to be increasing.

I heard from a gas engineer that some models of smart meter were designed to operate in climates that are very different from ours, so if they have been installed outside that can be a reason why readings do not make an awful lot of sense or do not appear to match up.

As I said in an intervention on my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey, although we are largely talking about people who pay by direct debit or in arrears, this situation is also affecting customers who pay by prepayment meters. The issue of prepayment meters has been discussed at great length, so I know the Government are aware of it and are trying to take action, but we have all argued repeatedly that there is more that they can do, which comes back to my hon. Friend’s recommendations.

For people who use prepayment meters in the way that they are designed to be used, the companies are getting that money up front—when the energy has not even been used. That is one of the key questions that the energy companies ought to answer and perhaps ought to be required to answer, either by the Government or Ofgem, or by any other mechanism by which they can be held to account. What are they doing with that money? I ask that question because, as I said in my intervention on my hon. Friend, it is not a balance just sitting there on an account; it is clearly not there for a customer to draw down as they see fit. It is clearly being used for other purposes: either to prop up the company elsewhere in its operations, or to earn very tidy interest because of course interest rates are going up. It is either contributing to the vast profits of the company or it is being used to shore up other parts of the company that may be having difficulties.

If the energy companies were required, as we suggested, to consider what benefit they gain from maintaining that money in their accounts, and had to recognise that in the form of discounts or an interest payment back to the customer, perhaps they would suddenly start moving a lot faster.

I agree with all the recommendations that my hon. Friend has made about how bills should be published and presented to consumers, so that they know exactly what their balance is and have the opportunity to draw that money down as quickly and on demand as they want. The company should have an obligation to do that. If they do not have such an obligation, we should look at how they can be incentivised to do so, or penalised if they are not going to respect their consumers. We want an energy market that functions effectively and well. We want to encourage people to reduce their demand on the system, which helps the environment, the ageing infrastructure, and the bank balances of our constituents—the consumers. The energy companies have to realise that they have got away with a lot of these things for too long, and the wider market now needs to be scrutinised in serious detail.

I end by quoting my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey, who said several times during the debate: this is not the energy companies’ money; this is money that our constituents—their consumers—have earned and have paid, expecting a service in return. It is not for companies to keep and profiteer from that money. If it is not being spent and does not reflect the consumer’s energy usage, it should be returned to the consumer so that they can use it to meet the increasing cost of living and other personal expenditure.

[Mr Clive Betts (in the Chair)]

We move on to the Front-Bench spokespeople. They have about 20 minutes each if they really want to take it, but that is entirely up to them.