Discussing Energy Economics on the Internet

UK Retailers Get Free Loans from Customers

Posted in Retail by Cheryl Morgan on the March 26th, 2009

According to the consumer advocacy organization, Which?, energy companies in the UK are getting large amounts of money in interest-free loans from customers. It works like this: customers get a lower tariff if they pay by direct debit, but rather than charging them the correct amount of the bill each month the utility helpfully smooths the pain by charging a flat amount each month. In theory this should average out at the correct amount each year, but the companies generally seem to manage to estimate usage that causes the customer to pay for more energy than they are actually using. Eventually, of course, the money has to be paid back, but in the meantime the utility has been getting a free loan.

For those of us who live in the UK the only real surprise about this is that it has taken people so long to catch onto this scam. Now that Which? has made a fuss, and politicians have noticed, hopefully Ofgem will do something about it.

Coverage of the issue is available via Platts, the BBC and The Times.

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