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).

 


Pension scams becoming investment scams, says Citizens Advice

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Fraudsters trying to steal money from people’s pension funds are increasingly offering to invest the cash into other scams, says Citizens Advice.
Individuals are typically told they should invest their pension money in fine wines or overseas property.
But many of the companies involved are not regulated and are not qualified to give financial advice.
It is thought that the fraudsters may be capitalising on the new pension freedoms, introduced in April.
Those freedoms allow people over the age of 55 to access their cash, subject to income tax.
Citizens Advice – which offers official guidance through Pension Wise – said that emerging scams include:
  • Unspecified financial products. Fraudsters offer to invest pension money in other products, without explaining what those products are
  • Free pension reviews. Fraudsters posing as independent financial advisers offer to visit victims at home, in an attempt to access their pensions
  • Investment schemes. Victims are persuaded to invest money in property, or in fine wine.
“Opportunistic fraudsters are finding new ways to go after people’s pension pots, including offering free pension reviews and promising to invest in funds that don’t necessarily exist,” said Gillian Guy, the chief executive of Citizens Advice.
‘Be careful’
A number of sites on the internet advise investors to transfer pension money into fine wine.
Most are not regulated by the Financial Conduct Authority (FCA).
They typically suggest that investors can achieve long-term average returns of 12-15% a year, or that wine is a better investment than shares.
One pension advisory firm, Portal Financial, has reported 11 such websites to Google this year, to try to get their adverts removed.
“Unless you know that it is a legitimate investment, you should be very careful,” said Jamie Smith-Thompson, the managing director of Portal Financial.
He said other investment scams included land banks and carbon credit schemes
Previously, so-called pension liberation scams have targeted the cash in a pension pot, charging a fee for “liberating” it.
But victims can lose more than half their money in such scams, as anyone under the age of 55 is liable for tax at 55%, while others may have to pay 45%.
Action Fraud – part of the City of London Police – said that cases of liberation fraud tripled in May, the month after the reforms were introduced.
However, the pensions minister, Ros Altmann, said she was not convinced that fraud was increasing as a direct result of the pension freedoms.


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