5 million consumers owed £193m in fuel bills rebate

13 October 2008 / by Daniela Gieseler
Up to five million energy customers should get an immediate rebate of up to £70 each or £193million in total from their energy providers that overcharged them, the National Housing Federation has demanded.

The charity's claim comes after the energy watchdog Ofgem ruled last week that customers who paid for gas and electricity on prepayment meters were overcharged after concluding an eight-month investigation into charges for prepayment meters.

Prepayment meters are usually chosen by households on low incomes looking to control their spending on fuel bills, and they are also obligatory for customers who have failed to pay their bills in the past or still have debts with their energy provider.

However, prepayment meter tariffs are much higher than standard or online energy tariffs, and energy companies have been criticized for overcharging those who could afford it the least.

In the ruling last week Ofgem proposed a series of measures including banning the unfair price differences between paying through prepayment meters and through cash, cheque, or direct debit.

The watchdog said energy providers were entitled to charge customers extra up to an amount which covers the cost of the meter, which is about £88. However, any premiums charged on top of that were found to be unjustified.

According to Ofgem's report, five out of six companies have been charging more than the fee for setting up and maintaining the meter, raking in nearly £200million a year from some of their most vulnerable customers. EDF Energy is the only energy supplier charging less than the £88 maintenance costs.

Both the National Housing Federation and new watchdog Consumer Focus recognised the results of the report, but criticised Ofgem for not taking action on it. Consumer Focus called on gas and electricity consumers to reduce their tariffs for low-income households or risk facing Government legislation.

Ofgem has given energy providers an ultimatum until 1st December to voluntarily drop prices for prepayment customers before it will take any further action such as referring the market to the Competition Commission.

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