£9bn in customers’ cash hoarded by energy companies

The cash pile exploded over the past year and reached its peak at November’s end when households were facing extreme financial pressure due to the cost of living crisis.

The Telegraph previously reported that electricity and gas companies had been increasing direct debit payments to customers, even for people who have substantial credit.

Figures from the past showed that energy companies had accumulated around £2 billion of customers’ cash.

According to Freedom of Information laws, the Telegraph received information that revealed that energy companies had amassed ££9.013 trillion by November 30, 2013. This revelation has raised questions about how much energy companies have amassed.

The energy watchdog said that the amounts collected by the firms were justified because suppliers helped customers “manage their bills”.

According to a spokesperson, “Suppliers help customers build credit through the expensive winter months. This information is now recorded at the peak of that activity and ultimately helps customers manage their bills.”

Electricity and gas bills nearly doubled in October 2021 due to the war in Ukraine. They are expected to reach £3,000 by April. Although the true cost to households is higher, they are being kept down by government support.

Energy companies often get more money from customers in summer when energy consumption is low. This allows them to have a large cash reserve for winter months.

Concerns are growing that energy companies are using customers’ money to fund their operations, something Ofgem allows.

Christine Farnish, an ex-member of Ofgem’s board, stated that on Thursday night: “It would seem that companies are collecting more than what they absolutely need. Based on the worst-case scenario.”

Sources at Ofgem claim that the new figure cannot compare with previously published figures on a similar-for-like basis. They also claimed that the regulator hadn’t found any evidence that energy companies were illegally hoarding cash.

Ofgem data shows that almost one million customers were affected by the energy crisis, with their direct debits increasing more than twice between February and April.

The Telegraph also discovered evidence in December that customers with more than 1,000 pounds of credit were seeing their direct debit payments increase as the winter months approached.

This comes after British Gas debt collectors broke into the homes of customers and forced them to use pay-as-you-go meters.

Centrica’s chief executive, who also owns British Gas said that there was nothing to excuse what had happened. The firm, which also owns British Gas, suspended pre-payment meters installations on Thursday. EDF and Scottish Power were also affected.

Centrica previously stated that it does not use customer money to finance its day-to-day operations and ring-fences its money.

Ofgem was under pressure to make other energy companies follow its lead, to protect customers’ funds in the event of a collapse.

A large number of households with high credit scores are currently protected. However, all customers share the costs, which can lead to higher bills.

Ofgem has refused to allow firms to use customer money as working capital. Instead, the regulator stated that it will request firms to report their customer debt balances every month or if they exceed half the company’s total assets. At which point the watchdog could step in and ask them for measures to safeguard it.

A spokesperson for Ofgem stated that “Protecting consumers” is our number one priority. We encourage suppliers to help customers spread out the cost of winter months over the course of a year to help customers manage their finances and avoid falling into debt. We have established rules that customers can request their balance back at any time.

“As a strong regulator, we are committed to taking action against suppliers that fail customers. This includes failing to refund credit balances.”

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