British Gas using millions of pounds of credit from ex-customers to boost profits, claims whistleblower - as Ofgem prepares to take on the Big Six

British Gas is using millions of pounds of credit built up by former customers to boost its own profits, it has been claimed.
The energy provider has taken £20m from customers with outstanding credit on their accounts and poured it into its annual accounts over the last year, The Observer said.
The accusation comes as damning new figures from Ofgem reveal profits made by energy firms on household bills have more than doubled in a year.

Confusion: Many energy customers complain that billing is confusing and that providers seem unable to estimate usage correctly.

The Big Six energy companies have driven through price hikes of up to ten per cent, blaming rising wholesale costs and green levies.
But figures from Ofgem reveal that the cost of buying gas and electricity has remained almost unchanged since autumn 2012.


Meanwhile profit margins have added around £50 in a year.

British Gas was the second of the 'Big Six' energy suppliers to hike prices this autumn when it put 8.4 per cent on gas and 10.4 per cent on electricity ten days ago.

 

A whistleblower told the newspaper that profits from credit - built up when customers use less energy than they are originally billed for - were taken by British Gas when private and business users were overcharged on initial estimates and then changed to another supplier, with outstanding money still owed to them.
The company used to wait six years before using a customer's credit for its own business, it was reported.
But the whistleblower claimed a special team was established to speed up the process so it can claim customers' money quicker, and has taken years of built-up credit to boost its income.
British Gas said it makes 'every effort' to track down former customers to return money to them, but said it is unable to locate all those who have left.
While the practice is legal, the company has drawn criticism for boosting its profits in such a way.
Caroline Flint, the shadow energy secretary, told The Observer: 'With practices like this it's no surprise people are mistrusting of the energy industry.
'It is simply not acceptable for suppliers to overcharge people on top of the extortionate bills they are already paying.
'When customers are in credit, this should be repaid. If companies can't find customers to repay them, they should use this money to keep bills down or help other vulnerable customers, not boost their profits.'

Price hikes: Despite gas and electricity wholesale and operating costs remaining almost unchanged since autumn 2012, the Big Six companies have pushed through price hikes of up to 10%

A British Gas spokeswoman said: 'We make every effort to track down any customer who has left British Gas and has credit with us so that it can immediately be returned to them.
'If, after every reasonable effort, we are unable to return the credit to them, it is accounted for in our audited accounts as per standard industry processes.
'If a customer subsequently contacts us, we will always issue any credit owing to them.
'At British Gas, we are doing more than ever before to track down the owners of these credit balances and would always honour a customer debt if the customer gets in touch.'
Bosses responsible for crippling rises this winter are due to be grilled by MPs tomorrow about claims they are driving up costs to make even bigger profits while leaving customers to choose between heating and eating.

Soaring profits: This graph shows how energy firms have seen their profits soar as bills go up. The wholesale energy cost has remained relatively stable

David Cameron is under intense pressure to tackle soaring bills, after Labour demanded a two-year freeze and former Tory Prime Minister Sir John Major called for a windfall tax to help the elderly to keep warm this winter.

Ofgem analysis shows that the average bill stood at £1,320 this month, up £70 or 5.6 per cent on the same month last year.

Wholesale energy costs – which make up the singled biggest part of the bill - have barely changed, up just 1.67 per cent or £10 in a year.
VAT, operating and other costs make up £1,255 of the bill, up £40 or 3.29 per cent.
However the biggest increase is the average net profit margin made on bills, up 111 per cent from £45 in 2012 to £95 now.

The price hikes will add £50 to every family's bill with some households seeing annual rises of more than £100

Caroline Flint, Labour's shadow energy secretary, said: 'Energy companies always blame rising global energy prices for putting up people's bills, but these figures show that under David Cameron they've been increasing their profits on the back of spiralling energy bills for hard-pressed households.
'If energy companies won't treat their customers fairly, then people deserve tough action from the Government. But David Cameron shows how out of touch he is, refusing to act. That's why Labour would freeze energy bills for 20 months and create a tough new watchdog with the power to force energy companies to cut their prices when the cost of energy falls.'
The revelation will fuel public anger at near double-digit rises in bills at a time when wages are up by around one per cent.
Ofgem admits that overall wholesale costs have soared in the last decade, up by around 140 per cent for electricity and 240 per cent for gas. Although in the last year wholesale costs have barely changed.
However, power firms insist that future prices for them to buy in supplies for this winter have risen.
The wholesale price of gas for use this winter is 8 per cent higher than the price of gas for use last winter, Ofgem says. The wholesale price of electricity is 13 per cent higher