How could energy companies safeguard their customers’ credit balances amid the energy crisis?
It has been reported that Chris O’Shea, Chief Executive of Centrica, during the company’s annual general meeting last week, slammed “newer, larger UK energy firms” for not supporting his proposals on the protection of credit balances.
A Centrica spokesperson told ELN: “When customers pay upfront for their energy, they are trusting their energy supplier to look after their money and they would be appalled if they thought their money was being used to fund day-to-day business activities.
“The current energy crisis has shown just how important it is that energy companies are financially resilient. Protecting credit balances is a vital part of a resilient energy market and we believe urgent action is needed to protect customers’ credit balances from further supplier failures.”
Octopus has criticised these proposals saying that they would have “virtually no impact” on the cost of supplier failure.
It said that instead, the proposals would increase energy prices and profits for energy suppliers.
An Octopus spokesperson told ELN: “Octopus would like to see stringent rules on hedging and management and if appropriate an ATOL-style insurance policy for credit balances.
“This would see greater protection for energy customers but cost five to ten times less than Centrica’s profit-swelling proposals.
“Given that customers are in debt to Octopus nine months of the year, Centrica’s assertion that companies are using credit balances to fund wider operations is categorically wrong.”
The company added that it has raised more than £1 billion of investment which was used to build technology that potentially reduces costs and bills.
It is estimated that the current crisis in the UK’s energy retail market has resulted in a loss of more than £500 million of UK consumers’ money.
In February, when the new price cap was announced, Ofgem said that the cost of supplier failures on customers’ bills would be £68 per year for the average user – half of that cost per customer, around £34, has been added on to the electricity standing charges.
Two months ago, Business and Energy Secretary Kwasi Kwarteng wrote to the energy regulator to ask for a crackdown on energy firms amid claims some are hiking charges by more than is justified.