Households due £285 rebate on fuel bills, says Citizens Advice

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Every household in the UK should get a one-off rebate of £285 on its fuel bills as a result of excess industry profits, Citizens Advice has said.

Over eight years, it claimed firms that transport gas and electricity – so-called energy networks – have made £7.5bn in “unjustified” profits.

It blamed the regulator, Ofgem, which sets industry price controls, for “errors in judgement”.

Ofgem disputed the claim and said it had already helped to lower fuel bills.

Citizens Advice said that network firms had enjoyed a multi-billion pound windfall at the expense of consumers.

As an example, Citizens Advice said National Grid had made an operating profit of more than £4bn in 2015/16.

However the company’s annual accounts show that around a quarter of that profit was made in the US or on other activities.

Complaints

“Decisions made by Ofgem have allowed gas and electricity network companies to make sky-high profits that we’ve found are not justified by their performance,” said Gillian Guy, head of Citizens Advice.

“Through their energy bills, it is consumers who have to pay the £7.5bn price for the regulator’s errors of judgment. We think it is right that energy network companies return this money to consumers through a rebate.”

Ofgem sets the charges that network companies like National Grid, SSE and Cadent – which distributes gas – can levy in any eight-year period.

That is because they are monopoly operators.

But in the current period, lasting from 2013 to 2021, Citizens Advice says Ofgem has been too favourable to the companies’ interests.

It claims that Ofgem:

  • overestimated the risks for investors in the networks, costing consumers £3bn
  • assumed interest rates would be higher than they turned out to be, costing consumers £3.4bn
  • rewarded companies that inflated cost estimates for projects, costing consumers £1.1bn
Cheaper costs

However, Ofgem said a number of the assumptions used by Citizens Advice were too high, and rejected the idea of a rebate.

“We do think they raise some valid points, but we don’t agree with their modelling or their figures,” said Jonathan Brearley, Ofgem’s senior partner for networks.

On Wednesday Ofgem also announced a consultation on how it should set price controls after 2021.

“We will take some of the issues into account when we examine future price controls,” Mr Brearley added.

He told the BBC that those controls are likely to be much tougher on the companies involved, providing downward pressure on bills.

At the moment, around a quarter of the average fuel bill is taken up by transmission charges.

The Energy Networks Association – which represents the operators – also said it did not agree with the modelling used by Citizens Advice.

It said a similar claim filed by British Gas had already been rejected by the Competition and Markets Authority (CMA).

 


British Gas investigated over switching fees

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British Gas is to be investigated by energy regulator Ofgem for potentially misleading customers over fees for switching to other providers.

Those planning a switch before a fixed-term deal expires can do so for free for up to 49 days before the deal ends.

But Ofgem is to examine allegations that British Gas told some customers they would have to pay a termination fee within that period.

The complaints were passed to Ofgem by the website MoneySavingExpert.

The website said it had received complaints from some customers that they had been told to pay up to £60 for switching, despite being within the 49-day period.

It is not known whether anyone actually paid the fees.

British Gas said it would co-operate with the inquiry, but gave no further comment.

Ofgem said that it would also be looking at whether British Gas had obeyed the rules which oblige them to write to customers on fixed deals, telling them they are about to expire.

However it said the opening of the investigation did not imply that they had made any findings of non-compliance.

‘Careless’

MoneySavingExpert said that it had received similar complaints about Npower at the end of last year, and subsequently about E.On.

Ofgem said it was talking to both companies about their exit fees, but they were not part of the inquiry.

News of the investigation was welcomed by MoneySavingExpert founder Martin Lewis.

“The rules are very plain; you cannot and should not be charged exit penalties if your switchover takes place within the last 49 days of your energy fix,” he said.

“At least two firms – British Gas and Npower – have wrongly put that they would charge in their official literature. At best they are careless in the way they treat customers; at worst that they are trying to bully them into staying with misinformation.”


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