Ofgem calls on suppliers to take action on over £400 million they hold from customers' closed accounts

Publication date
28th February 2014
Information types
Policy areas
  • Large suppliers hold balances from closed accounts of at least £202m from former domestic customers and £204m from former non-domestic customers
  • Ofgem expects suppliers to do more to return money to consumers, building on recent commitments to provide automatic refunds to current direct debit customers who are in credit
  • Around 3.5m household accounts and around 300,000 business accounts affected

Ofgem is calling on large suppliers to make sure money is returned to their former customers after our analysis revealed that these companies hold more than £400m in credit from closed accounts. This builds on recent commitments by most major suppliers to automatically refund surpluses to current direct debit customers.

Ofgem has been enquiring into the balances held by energy suppliers in relation to accounts that are now closed, and into the companies’ policies and practices that apply. This concerns customers who have closed accounts, for example because they have changed supplier or moved house. Ofgem’s analysis shows an unacceptably large amount of money being retained rather than returned to consumers and a wide variation in company practices.

With the recent rise in the number of consumers switching supplier, people need to be confident that they won’t lose out if they close an account with their present supplier. Ofgem expects suppliers to do all they can to return money to individual consumers, and to tell consumers clearly what to do when closing an account. Where it isn’t possible to repay a balance, suppliers should find ways to use this money to benefit consumers more widely, and make clear to customers how much is held and why. We are looking at whether suppliers’ current policies and practices relating to giving money to individual customers are fully compliant with existing rules including those requiring companies to treat consumers fairly. Our advice to consumers who believe they may still be owed money by a previous supplier is to contact the company directly and ask for it back.

Andrew Wright, Interim Chief Executive of Ofgem, commented: “When many people are struggling to make ends meet, it is vital that energy companies do the right thing and do all they can to return this money and restore consumer trust.”

“We want to see decisive action by suppliers, individually and collectively, to address this issue and, wherever possible, to ensure that the balances they currently hold are returned to consumers. Where this can’t be done any remaining sums should be used to benefit consumers more generally, and suppliers need to be very clear with consumers about what they will be doing with this money.”

Ofgem has identified three key issues that must be resolved:

1. Reuniting individual consumers with their money

We want to see suppliers doing all that they can to ensure that money is returned to the people to whom it is owed, with an industry-wide campaign to ensure that refunds are made wherever possible. Our new enforceable Standards of Conduct require that suppliers treat consumers fairly. We will examine whether the practices of individual suppliers have breached our rules.

2. Using balances that cannot be returned to individuals to benefit consumers more widely

Where money cannot be returned to individual consumers, we expect companies to find ways to use this money to benefit consumers more generally and be clear in communicating what they will do with this unclaimed money.

3. Preventing this issue from happening again

Suppliers’ policies and processes must prevent such large sums being retained by them, with crystal-clear communication to consumers about what to do when closing an account. They should be open with customers about the size of the balances held and what they are doing with them.

 

Notes to editors

1. Ofgem analysis on closed account balances

Closed account credit balances

Domestic Amount
Total balance (£) £202m
Accounts affected 3.5m
Non-domestic Amount
Total balance (£) £204m
Accounts affected 0.3m
Total Amount
Total balance (£) £406m
Accounts affected 3.8m

Note: these are minimum rounded figures based on data supplied by the larger six suppliers for the last six years. We do not separate these numbers by supplier because the data is not sufficiently comparable. Ofgem will be undertaking further work on this data to gather a fuller picture.

2. Advice to consumers

  • If you switched away to another supplier or changed tenancy get in touch with your former supplier. It is helpful if you have to hand a copy of your previous bill with information of your account details and your former address if applicable. Proof of identify may also be required
  • If you think a deceased relative may have been an account holder you will need to demonstrate your entitlement to any proceeds of their estate if you are pursuing their closed account
  • If you are about to switch supplier, take a meter reading just before doing so and if you are moving, ensure you give a forwarding address to the supplier you are leaving

3. Ofgem’s reforms:

Ofgem has introduced radical changes to the energy market to make it simpler, clearer and fairer for consumers. Here is a summary of what these include:

Helping consumers to get a better deal

Fairer treatment - To help rebuild consumer confidence, since 26 August 2013 suppliers have had to meet our tough Standards of Conduct so that domestic consumers receive fairer treatment.

Simpler choices – from Jan 2014 suppliers have had to offer fewer and less complex tariffs, making comparing tariffs easier and less time consuming.

Clearer information – from April 2014 changes to make bills, Annual Statements and other communications clearer and more informative will be in place. These changes will ensure consumers have helpful information to use when comparing tariffs.

Increasing liquidity in the energy market

From 31 March 2014 new rules will come into force meaning the six largest suppliers and the largest independent generators will have to trade fairly with independent suppliers in the wholesale market, or face financial penalties. The six largest suppliers will also have to publish the price at which they will trade wholesale power up to two years in advance. These prices must be published daily in two one-hour windows, giving independent suppliers and generators the opportunity and products they need to trade and compete effectively. Publishing the prices will make the market much clearer.

4. About Ofgem

Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.

For further press information contact:

Dafydd Wyn:   020 3263 9943
Howard Rhoades:  020 3263 9629
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Mark Wiltsher:  020 7901 7006
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