Energy companies breach EU regulations

04 August 2008

Energy firms overcharge customers for not paying by direct debit

According to claims made last week, energy customers are being overcharged by as much as £1bn a year by utility firms, in breach of European Union laws.

This has provoked lawyers to say that the breach could result in thousands of consumers suing their utility companies for the overpayments, much like the push seen in 2007 with reclaiming bank charges.

A report released last week by MPs on the Business and Enterprise committee said that the 10m consumers who choose to pay their quarterly gas and electricity bills by cash or cheque are being overcharged by £699m. Those customers who pay by pre-payment meter are overpaying by as much as £400m.

This extra amount is above that which the EU directive allows. The rule stipulates that any difference in cost between different payment methods should reflect the true cost to the energy company. MPs say that this maximum difference is just £20 but some suppliers charge as much as £69 more.

Graham Kerr, of energy watchdog Energywatch, said: “I expect consumers to demand lower payment or even ask for a refund in the same way as bank-charge customers.”

The committee of MPs want energy suppliers to be forced into lowering tariffs through “price controls” if they did not act on the issue within 12 months.

The report said that standard credit customers, those who choose to pay their energy bills each quarter by cash or cheque, pay 11% extra for their energy on average – or the equivalent of £89 extra each year.

“The ‘Big Six’ are on average overcharging pre-payment customers by £59 a year, and those on standard credit by £69,” the report said.

According to Tom Brennan of Atlas Chambers, the law firm that started the large influx of bank-charge claims in 2007, this extra amount charged is against the 2003 EU Directives.

“If the MPs’ report is correct, then it would seem energy firms are in breach of their duties,” Mr Brennan said.

“It would suggest the consumer could and should bring these claims to a court if they cannot obtain a refund from their supplier,” he added.

Consumers who have been overcharged would be entitled to ask their energy companies to pay them back overcharged amounts dating back four years.

There are 10.14m standard credit and 3.64m pre-payment customers in Britain and so energy companies could potentially be set to pay back over £3bn.

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