Ofgem under pressure to act on 'unfair' out-of-contract energy rates

Ofgem has been urged to tackle cost discrepancies between fixed and out-of-contract rates on energy bills.

It comes after a consultation on transparency over ‘hidden’ energy broker fees used to inflate customers’ bills, which was spearheaded by non-profit energy consultancy Box Power CIC, closed on 6 September.

Corin Dalby, chief executive of Box Power CIC, said Ofgem must go further to resolve the “unduly onerous” out-of-contract rates.

These often apply to businesses, charities or organisations which have moved premises and do not have a fixed rate or have yet to secure a contract. They may also be at the end of their fixed rate contract.

Ofgem warned that deemed and out-of-contract rates “are usually among a supplier’s most expensive”.

Box Power CIC first raised the issue of suppliers making a profit from out-of-contract rates ten months ago but said it has seen instances of gas still being sold at almost three times the standard rate.

The social enterprise business has proposed a Wholesale Price Plus mechanism to tackle the issue, which would split energy bills into the commodity (what businesses would pay in advance for each billing month) and the non-commodity (made up of 16 other criteria, such as cost to serve and risk premiums).

Dalby said: “Our proposed Wholesale Price Plus mechanism enables a simple formula that brings fairness to all businesses on such rates, but which still enables the suppliers to be fairly compensated for the burden/inconvenience of suppling such meters.

“This would then ensure those caught out by such out-of-contract/deemed rates whether through business choice or as a new incoming tenant into that business etc are being fairly treated by not paying “unduly onerous” rates.”

In July, Ofgem set out a plan to crack down on rogue energy suppliers and brokers and make it easier for businesses to complain about their behaviour. It said it aimed to put the proposals into action “before the cold winter months return”.