Prepay energy customers overpay £464m in potential breach of EU rules

Energy regulator Ofgem has been accused of failing millions of hard up families after it was revealed that several energy firms have been allowed to charge prepay meter customers a higher tariff in a potential breach of EU rules.

Lawyers for the National Housing Federation have stated that charging a higher rate for prepay meter customers – usually the group worst off financially – is potentially in breach of EU directives introduced in 2004, under which they are only allowed to charge higher prices to prepay meter users if this is reflected in the additional cost of administering the meters.

The National Housing Federation has estimated that in the three year period between 2006-08, millions of prepay meter customers were charged well in excess of the average extra cost for installing and maintaining gas and electricity prepay meters, up to a total of £464m.

According to official figures, npower, British Gas, E.ON, SSE and Scottish Power all charged prepay customers more than the average cost of supplying meters. Ofgem is currently consulting on new regulations to stop this overcharging practice, but the National Housing Federation argues that Ofgem has failed to ensure that all extra charges to prepay customers were purely cost reflective – with some prepay meter customers being charged up to £500 more than those paying by online direct debits.

The National Housing Federation has also warned that Ofgem’s new rules would still allow the energy firms to charge prepay meter customers more for their fuel – if it was cost reflective. As such, it has recommended that when Ofgem introduces the new rules, it should go further than the EU directives and compel the firms to equalise prepay tariffs with those for quarterly bills.

Federation chief executive David Orr said:

“It is an absolute scandal that Ofgem allowed energy firms to overcharge customers, and potentially breach EU rules for so many years. Ofgem has been asleep on the job, and it must urgently start defending the rights of ordinary people, instead of protecting the profits of big business. As a way of compensating prepay customers for the historic overcharging, Ofgem has a moral duty to go beyond the EU directives, and force the energy companies to equalise prepay meter prices with those for quarterly bills – Some companies, including Npower, E.ON and Scottish Power, have already proved that energy firms can absorb the additional costs rather than passing them on to their poorest customers, and Ofgem must outlaw the practice of discriminating against prepay meter users once and for all.”

Meanwhile, online complaints service Disputer.com has released the results of a study which shows that Brits are failing to claim nearly £1.2 million of compensation every week from their energy and water companies when they receive unsatisfactory service.

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