Energy firms hold on to cash belonging to customers who switch providers

Energy firms have been accused of swelling their mammoth profits by holding on to the cash of customers who have deserted them.

Record numbers of fed-up families switched providers this winter after enormous price hikes in October and November.

But a Sunday Post investigation has uncovered cases where customers have been involved in long-running battles with the firms to reclaim money they’re owed.

Experts say the cash held on to by energy companies could have totalled £150 million in the last year alone, earning them millions in interest.

Energy campaigners say government regulators are “asleep at the wheel” over the issue with advice groups saying it is a growing concern among consumers.

Now politicians are set to grill energy fat cats over the debacle when they appear at Westminster.

Labour MP John Robertson, a member of the Energy and Climate Change Committee who have previously hauled energy firm bosses into Parliament to explain their profits, said: “The companies could face big fines if this is shown to be happening.

“Making it hard for customers to switch and holding on to their balance is not acceptable. I will be asking energy bosses to explain themselves the next time they are in front of the committee.”

Around three million people in Britain switch their energy supplier every year and it’s growing. An incredible 150,000 Brits abandoned the Big Six in just one month last year to move to smaller providers. Half of customers switching are believed to be in credit with their former provider by £100.

Mark Todd, director of comparison website Energyhelpline, said: “Ofgem should fine companies that hold on to people’s cash after they’ve switched. I don’t know if some firms are doing it on purpose to earn money in interest, but I suspect they are. Some companies appear to wait until customers tell them their former accounts were in credit before doing anything about it.

“I personally had to chase a former energy supplier for money they owed me after I switched. I don’t think they’d ever have given me it if I hadn’t asked for it. It took three months before I got it back. I know of a lot of cases where companies took months to refund people.

“Some parents are struggling to feed their kids and yet energy companies are holding on to hundreds of pounds of their money. It’s a massive issue and extremely common. Our call handlers alone deal with about 100 complaints a week about this.

“It’s an easy issue for the regulator to fix it’s about time they did.

“These are profit-making companies so if we don’t have strict rules on this then it will end up like the Wild West.”

Scott Byrom, of Power UK, who provide independent advice for consumers looking to switch energy suppliers, said: “We’ve heard of this happening regularly. I would say we deal with this issue on a daily basis.

“There are no rules at present to make suppliers pay customers any interest earned on money they were owed.

“I wouldn’t rule out cases of people who never got their money back because they didn’t realise they were in credit when they switched.

“Change is definitely needed in the industry. Suppliers should return overpayments quickly and on a regular basis.”

Last year UK Energy Minister Greg Barker said he reached an agreement with Britain’s Big Six energy firms that they would pay back cash they’d been hoarding from direct debit overpayments. Energy firms said they would offer cash refunds automatically to customers if an account was in credit by more than one month’s payment. However, Mr Byrom said the complaints advice agencies are dealing with suggest this still isn’t happening.

He said: “As far as I’m aware it was just an agreement with the energy firms rather something ingrained in law. The complaints we’re receiving suggest nothing has changed yet.”

Archna Luthra, spokeswoman for MoneySavingExpert.com, said: “Outrageously there are no robust rules in place which force firms to cough up cash that belongs rightfully in consumers’ pockets. How readily they refund once you’ve switched away depends on the firm.

“This is the type of issue that Ofgem, the regulator, really needs to flex some muscle on and ensure energy suppliers do the right thing. Money owed can be as much as a few hundred and if it takes you three months to get a refund that’s potentially a decent wedge of interest you’ve missed out on.”

Jo Ganly, energy expert at uSwitch.com, said its advisers had also dealt with numerous customers who had sought help in trying to get their money back.

An Ofgem spokesperson said: “Suppliers must refund credit that has built up in customers’ accounts if they ask for it. If suppliers think there are reasonable grounds for withholding credit, they should explain what these are to customers, who will then be able to challenge suppliers if they think they are wrong. If a customer has trouble getting a refund when switching supplier, we suggest that they first raise this through the supplier’s complaints process.

“If they’re not satisfied with the way the complaint is handled, they should get in touch with the independent energy ombudsman service.”

The energy ombudsman said they did not compile how many complaints were made on this issue.

Hannah Fensome, spokeswoman for industry umbrella group Energy UK, said: “When customers move supplier they can get their money back in full if they are in credit. This takes a little time as companies need to get final meter readings.”

Kara Harrison, 34, from South Queensferry, was a customer with Scottish and Southern Energy for around five years. But in October after the firm became the first of the Big Six to announce an increase in domestic bills she decided to switch supplier. Kara and her husband Iain shopped around for the best deal before eventually opting for a fixed rate package with npower.

During the switching process they had to calculate the amount of energy they use each month. They worked out they’d been paying SSE too much and could be owed up to £500.

In December they contacted the firm and asked for their money back, hoping it would be returned to them in time for Christmas. But after a bit of to-ing and fro-ing by email SSE said the refund would take up to six weeks to process from the date it received the couple’s final meter readings from the new supplier.

Kara then got in touch with npower who confirmed those were handed over to SSE on December 14. Nine weeks since then and around 17 weeks since switching Kara and Iain still haven’t received a penny.

On Thursday they sent yet another email to SSE to find out what was happening. They responded the following day with an apology and an assurance the money would be credited to their account this week.

Kara said: “The whole situation is ridiculous. I’ve spent four months trying to get my own money back. If it was an energy company trying to get money I owed them I’d probably have had letters threatening legal action by now.

“I’m owed a significant amount. What’s more, I feel annoyed that my money will be sitting in SSE’s account earning them interest.”

Last Friday EDF Energy became the first energy supplier to promise to repay all customers in cash once a year if direct debit payments result in them overpaying by small amounts.

Until now customers have been left frustrated as smaller overpayments were not repaid but instead used to lower their future bills.

The company has also promised to review customers’ direct debit payments every six months if they provide a meter reading. This will ensure monthly payments are set at the right level and help avoid either a large credit or debt on the account.

At present EDF Energy automatically repays direct debit customers who have built up a credit of £75 or more in their annual statement. Customers can still request any money owed below this level, but if they did nothing the credit would be added to their next bill.

But the firm will now automatically refund customers with any credit owed, regardless of the amount, even when they forget to ask for it. The company said the new scheme will be implemented “as soon as possible”.

Additional reporting by Gordon Blackstock