Pre-payment Meters

[megan34]

Has anyone seen this:

 

Millions 'to sue energy firms for overcharging'

 

Ten million energy customers could have grounds to sue gas and electricity companies for overcharging them.

 

 

 

By James Kirkup, Political Correspondent

Last Updated: 8:41PM BST 03 Aug 2008

 

 

People who pay for gas and electricity by cash, cheque or by pre-payment meters are being charged hundreds of millions of pounds more than they should be, a parliamentary inquiry found last week.

That could put the energy firms in breach of European Union rules on price-setting.

MPs on the Industry Committee estimate the scale of the over-charging at more than £1 billion a year.

The MPs found that bills for "standard credit" customers using cash or cheques were on average 11 per cent higher than for those on direct debit worth £89 a year. The gap was only £37 in 2004

Customers using pre-payment meters are paying £144 more a year.

Energy companies insist that the higher prices paid by cash and meter customers simply reflects the higher costs the firms pay to process such payments.

But Ofgem, the energy regulator, says the cost to firms of processing standard credit payments is just £20, meaning customers are being overcharged by £69 a year. For meter payments, it was £85, an excess charge of £59.

Ofgem is also scrutinising the extra charge made to some customers, and has the power to cap the excess charges.

The regulator will publish a major report on the energy sector next month, which is expected to severely criticise the firms over the practice and encourage customers to apply for refunds.

According to Tom Brennan, the public law barrister who brought a test case against a high street bank for charges applied to customers' accounts, customers may ultimately be able to use a 2003 EU directive on fair pricing to sue for their money back.

He said: "It would suggest the consumer could and should bring these claims to a court if they cannot obtain a refund from their supplier."

The prospect of mass action against the energy firms emerged as Government ministers consider some form of windfall tax on them.

Labour backbenchers and trade unions want to see a punitive tax applied to firms like British Gas, which last week announced a 35 per cent rise in gas prices.

Gordon Brown is considering the plan, but it is strongly opposed by ministers including John Hutton, the Business Secretary, who argue it would undermine any Labour claim to be pro-business.

As as result of that opposition, the Government is unlikely to impose a simple tax on the companies. Instead, officials are looking at options for charging the firms more for the pollution they cause.

Ofgem has claimed that energy firms were handed £9 billion in "free money" when they were given emissions trading permits free of charge.

Some of the permits are now auctioned, and one option ministers are studying is increasing the number of permits put up for sale, a move that could cost the industry £500 million over the next 12 months.

Malcolm Wicks, the energy minister, refused to comment on a windfall tax, but he said that firms will be required to contribute more to "social tariff" schemes that cut prices for the poorest and most vulnerable customers.

"Supply companies like British Gas and EDF do have a social obligation, they are not mere private companies," he told Sky News.

 

 

Millions 'to sue energy firms for overcharging' - Telegraph

 

Anyone any idea where we start to sue for our money back?

[Tom Brennan]

This report stems from an earlier report in the Sunday Times (Money Section) dated 3 August 2008. The full Sunday Times report can be seen here:

http://www.timesonline.co.uk/tol/mon...cle4448569.ece

 

I have produced a note in response to this report, which identifies the relevant Directives and some of the issues involved:

 

Following from today’s article in the Sunday Times relating to price differentials in payment methods for gas and electricity customers, I am posting on here to give some additional background information. The following is the correct position to the best of my knowledge, but if you are going to rely on the following statements in court or in correspondence with your gas or electricity supplier, then I must recommend that you get your own independent legal advice. The legal research I have undertaken in respect of this issue is not final, and my thoughts on this issue may be refined in light of further research.

Before I start I would also like to correct a slight error in the report in the Sunday Times: when Ali Hussain states “Tom Brennan of Atlas Chambers, the law firm that initiated a surge in bank-charge claims last year”, it should be noted that Atlas Chambers is a barrister’s chambers, and not a law firm at all. And whilst my case may have been one of the factors that helped to highlight the issue of unlawful bank charges, I would like to stress that I had not joined Atlas Chambers at the time of my case. At that time, neither Atlas Chambers nor its members were linked to my case or bank charges generally.

Now to the substance.

The Office of Gas and Electricity Markets (Ofgem) is the responsible Authority for regulating gas and electricity suppliers, and has as one of its statutory objectives a duty to protect consumers. Ofgem is responsible for issuing licences to the relevant suppliers, and such licences are a pre-requisite for the national supply of electricity and gas.

There has been a great deal of consumer concern at the increasing level of gas and electricity bills, which has seen the recent introduction of the term “fuel poverty”, which is defined as “Households which spend in excess of 10% of their income on maintaining an adequate level of heating and lighting”: see page 42 of the House of Commons Business and Enterprise Committee Report on Energy prices, fuel poverty and Ofgem, (hereafter “the Select Committee Report”), which can be found at http://www.publications.parliament.uk/pa/cm200708/cmselect/cmberr/293/293i.pdf

There has been particular concern at the standard practice by energy suppliers in charging significant differences between the different payment types for bill payments. If a consumer pays by cash, cheque or pre-payment meter, then they are likely to be charged significantly more than those customers paying by direct debit.

However, under paragraph (d) of Annexe A to EU Directives 54/2003 and 55/2003 (extracts below), gas and electricity suppliers must offer a wide choice of payment methods, and any difference in terms and conditions (e.g. price) must reflect the costs to the supplier of the different payment systems. In essence the suppliers are not allowed to profit from using different payment methods, as it is normally those who must pay by cheque, pre-payment meter, or cash, that are normally the hardest hit by fuel costs and “administrative costs”, and those most likely to fall within the definition of “fuel poverty”. These EU Directives had to be implemented by the UK by 1st July 2004.

However, it does not appear that the UK has implemented those Directives correctly, specifically in relation to the requirement that any price difference between the payment types having to reflect the actual costs to the supplier.

In paragraphs 83 to 88 of the Select Committee Report mentioned above, MPs reached the conclusion that there was significant overcharging by energy suppliers for any payment type that was not by direct debit. They concluded that: “The ‘Big Six’ are on average overcharging pre-payment customers by £59 a year, and those on standard credit by £69.”

Under previous UK Regulations, between 2004 and 2006, Ofgem operated standard licensing conditions for electricity and gas suppliers that are different to the current conditions that are imposed on suppliers today. Under those old licences, the suppliers had tosupply different payment methods under Condition 43: Contractual Terms - Methods of Payment. Condition 43(4) stated that “The [supplier] shall process all requests for a supply of electricity to domestic premises without undue preference or undue discrimination” in respect of those different payment types (gas suppliers had the same standard terms). This could arguably have been in line with the European Directives which have already been mentioned, and the requirement that any difference in price reflect the actual cost.

But Ofgem revised the standard licensing conditions in 2007, and since then Condition 27 (the new condition on payment types) no longer makes any reference to “undue preference or undue discrimination”. In effect, the new licensing conditions are a step back for consumer protection.

Ofgem does seem to have picked up on this point, which can be seen in the Fuel Poverty Summit Action Group that it convened in April this year:

http://www.ofgem.gov.uk/Sustainability/SocAction/Publications/Documents1/Fuel%20Poverty%20Summit%20Action%20Programme.pdf, at page 7, Commitment L. Ofgem is now considering how this issue may be addressed in possible new licensing obligations.

However, the measures to implement the relevant European Directives were supposed to come into force by 1st July 2004, but it appears that the UK has failed to implement them correctly. Our UK legislation, and the licensing regime that stems from it, does not appear to reflect the requirements under the European Directives.

So where does this leave consumers? If the content of the Energy Report by the House of Commons Business & Enterprise Committee is correct, then it follows that the gas and electricity suppliers are acting in breach of the Directives as they are charging more than the actual cost of processing cheques, etc, to their customers. The consumer could therefore have a claim against the company on two grounds:

First, that the contractual term is unlawful as a result of the European Directives and/or the 2004-2007 standard licensing conditions, and therefore unenforceable. The consumer would therefore be claiming back any payments that have been made to the supplier as a result of those contractual terms that are found to be unlawful. It should be noted that there is an actual cost to the supplier of the different payment types, but the assertion made in the Select Committee Report is that those price differences that are being charged do not reflect the actual costs. Any consumer challenging such price differentials would be required to prove their case, and would have to rely heavily on the content of the Select Committee Report and associated documents.

Further or alternatively, the consumer could bring a claim for “breach of statutory duty”. I stress could, because this area of law is still very much developing. European Treaties and Regulations (two of the three forms of European legislation) that have direct effect in this country and are intended to protect a particular class of persons are considered to impose a “statutory duty”, and failure to comply with those Treaties or Regulations can amount to a “breach of statutory duty”.

However, where the laws are enacted through European Directives (the third form of European legislation), the law is less clear. It is not certain whether the customer in this case could bring a claim against their supplier for breach of statutory duty. There is case law to suggest that they can, and there is case law to suggest that there is no such remedy in tort. The issue is far from settled, and a test case may have to be run in order to establish legal certainty on the issue.

The good news for consumers is that if a court rules that the consumer does not have a claim against the supplier in contract or in tort, then the consumer could make a claim against the Government for failing to properly implement the European Directives, where the consumer has suffered loss as a result of that failure to properly implement the Directives. Essentially, the consumer would get two bites at the cherry, first against the supplier, and second against the government. If a test case were to be run, it may be that both the supplier AND the government could be joined as joint defendants to the case.

On a practical note, however, a consumer who has been charged excessively by their supplier for paying by cheque or by cash, etc, could write to their supplier and demand a repayment of the amount that they have been overcharged.

I may, in the course of the week, draft such a standard letter for open use, but I must stress again that if it comes to any legal proceedings you must get your own independent legal advice.

I hope this information comes in useful.

Tom Brennan

 

Below are the extracts of the relevant Directives and Standard Conditions from the old licensing regime.

DIRECTIVE 2003/55/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC

Article 3

Public service obligations and customer protection

1…

2…

3. Member States shall take appropriate measures to protect final customers and to ensure high levels of consumer protection, and shall, in particular, ensure that there are adequate safeguards to protect vulnerable customers, including appropriate measures to help them avoid disconnection. In this context, they may take appropriate measures to protect customers in remote areas who are connected to the gas system. Member States may appoint a supplier of last resort for customers connected to the gas network. They shall ensure high levels of consumer protection, particularly with respect to transparency regarding general contractual terms and conditions, general information and dispute settlement mechanisms. Member States shall ensure that the eligible customer is effectively able to switch to a new supplier. As regards at least household customers these measures shall include those set out in Annex A.

ANNEX A

Measures on consumer protection

Without prejudice to Community rules on consumer protection, in particular Directives 97/7/EC of the European Parliament and of the Council (1) and Council Directive 93/13/EC (2), the measures referred to in Article 3 are to

ensure that customers:

….

(d) are offered a wide choice of payment methods. Any difference in terms and conditions shall reflect the costs to the supplier of the different payment systems. General terms and conditions shall be fair and transparent. They shall be given in clear and comprehensible language. Customers shall be protected against unfair or misleading selling methods;

Article 33

Implementation

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive not later than 1 July 2004. They shall forthwith inform the Commission thereof.

DIRECTIVE 2003/54/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC

Article 3

Public service obligations and customer protection

5. Member States shall take appropriate measures to protect final customers, and shall in particular ensure that there are adequate safeguards to protect vulnerable customers, including measures to help them avoid disconnection. In this context, Member States may take measures to protect final customers in remote areas. They shall ensure high levels of consumer protection, particularly with respect to transparency regarding contractual terms and conditions, general information and dispute settlement mechanisms. Member States shall ensure that the eligible customer is in fact able to switch to a new supplier. As regards at least household customers, these measures shall include those set out in Annex A.

Annex A

….

(d) are offered a wide choice of payment methods. Any difference in terms and conditions shall reflect the costs to the supplier of the different payment systems. General terms and conditions shall be fair and transparent. They shall be given in clear and comprehensible language. Customers shall be protected against unfair or misleading selling methods;

Article 30

Implementation

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive not later than 1 July 2004. They shall forthwith inform the Commission thereof.

ELECTRICITY SUPPLY LICENCE: STANDARD CONDITIONS (Old conditions 2004-2006)

Consolidated to 11 August 2006

Condition 41. Terms for Supply of Electricity Incompatible with Licence Conditions

1. The licensee shall not enter into or offer to enter into a variation of or operate any domestic supply contract or deemed contract for the supply of electricity to a customer at domestic premises otherwise than on terms which comply with the licensee’s obligations under the licence.

2. The licensee shall not enforce or take advantage of any term of a domestic supply contract for the supply of electricity to a customer at domestic premises if:

(a) the inclusion of that term was incompatible with its obligations under any of

the conditions, or

(b) the enforcement or the taking advantage of that term would be so incompatible.

3. The licensee shall not take advantage of the omission of any term from a domestic supply contract or deemed contract for the supply of electricity to a customer at domestic premises if that term was required to be included in the contract or deemed contract in question by reason of the conditions.

Condition 43. Contractual Terms - Methods of Payment

1. Where the licensee offers to supply electricity to domestic customers under a domestic supply contract, it shall have available forms of domestic supply contract which provide for the payment of charges for electricity supplied to domestic premises:

(a) by prepayment through a prepayment meter;

(b) by different methods, including:

(i) by cash, at such places and to such persons, as are reasonable in all the circumstances; and

(ii) by cheque, and

© at a reasonable range of different intervals, including:

(i) paying twice-monthly or fortnightly or more regularly, such sums as agreed;

(ii) paying monthly a predetermined sum; and

(iii) paying quarterly in arrears.

2. Where the licensee supplies electricity to domestic premises under a deemed contract, the terms of that contract shall include terms in respect of all the ways of making payments mentioned in sub-paragraph 1(b) and the frequencies mentioned in subparagraph 1©. The foregoing shall not apply to deemed contracts made following a direction under paragraph 1 of standard condition 29 (Supplier of Last Resort).

3. Before entering into any domestic supply contract (other than through a prepayment meter) the licensee shall inform the customer of and offer to enter into domestic supply contracts which comply with sub-paragraphs 1(b) and ©.

4. The licensee shall process all requests for a supply of electricity to domestic premises without undue preference or undue discrimination.

[megan34]

Does that mean we might get a refund backdated some years? then?

Its a disgrace that peopl who pay in advance for what they are going to use are penalised by being charged more - yet those who get their gas and electric on 'credit' so to speak - pay less - where else would this happen? its absolutely disgraceful - Im changing to EBICO this month - I just found out they dont charge for paying in advance!

Megan

[Tom Brennan]

The EU Directives came into force on 1st July 2004, so in my opinion any potential claim could only be back-dated to that date.

[andrew1]

Wouldn't it be nice if the government who were supposed to implement this ruling did the honourable thing and imposed a directive on all those companies who receive this payment to just refund the relevant amounts to the key holders of prepayment machines and save a repetition of this debacle over bank charges. This would make sure everyone who has paid gets this back without putting them through the horrors of having to fight with legal jargon they know little or nothing about.

 

The people who have got their bank charges back or who have challenged loan companies and credit card companies have had to have a constitution of steel and time on their hands to do this. For once why isn't this directive, apparently in place since 2004, just put right by the powers that be upon the businesses concerned and save a lot of people a lot of stress and concern?

 

I am sick of having to fight for everything no matter how unjust, unlawful or irresponsible it may have been by the parties concerned.

 

Sarah

[derekchambers]

are prepayment meters more expensive than normal meters

 

I had heard that the bill is anything up to 20% more

 

derek

[ihavereclaimedmyrights]

I would be prepared to claim a refund from british gas on elec and gas ppm

[conradsfate]

i'm with british gas and have a prepayment meter.

 

i'm sticking in about £20 - £25 per week - thats my electric.

 

my gas is higher and thats prepayment too

 

im on income support with kiddies and its freezing sometimes but im frightened to put the gas on as it sucks it - i have to space it out.

 

i asked british gas if i could have the meters out and have normal ones in so i could pay by direct debit. these were in here when i moved in.

 

they said i had to go through a credit check first.

 

they came back and told me it would cost me £300 for the electric one and £200 for the gas one. if i was seen as a good payer for 12 months i would get it back.

 

where the hell can i get that from i told him im on income support. he just said he was sorry but thats the way it goes...

 

i would change supplier but i dont know whos cheaper - the men are supposed to deal with this problem - and i aint got one - im not good with this stuff.

[Clare_L]

i'm with british gas and have a prepayment meter.

 

i'm sticking in about £20 - £25 per week - thats my electric.

 

my gas is higher and thats prepayment too

 

im on income support with kiddies and its freezing sometimes but im frightened to put the gas on as it sucks it - i have to space it out.

 

i asked british gas if i could have the meters out and have normal ones in so i could pay by direct debit. these were in here when i moved in.

 

they said i had to go through a credit check first.

 

they came back and told me it would cost me £300 for the electric one and £200 for the gas one. if i was seen as a good payer for 12 months i would get it back.

 

where the hell can i get that from i told him im on income support. he just said he was sorry but thats the way it goes...

 

i would change supplier but i dont know whos cheaper - the men are supposed to deal with this problem - and i aint got one - im not good with this stuff.

 

 

Call around for a few quotes from suppliers explaining your situation. I work for Eon and they charge £50 for each meter but they wouldnt remove it for the first 3 months (also their prepayment prices have recently come inline with standard credit meters). Always best to check about though. If you wanted to stay on PPM though, a lot of people rave about Ebico.

[caz_cazzy]

i was told by eno that if i want to get rid of my prepayment meters i had to pay £50 for each meter thats £100 befor you use any gas /ele thats a joke .

[chipbutty]

Hi Tom ,

I may, in the course of the week, draft such a standard letter for open use, but I must stress again that if it comes to any legal proceedings you must get your own independent legal advice.

Thanks for such a detailed contribution.

Extremely helpful.

 

Did you ever get round to creating your letter template?

 

If you did please guide me to it as I am very new to the site.

 

Cheers Chipbutty

[DCA-KING]

Are you on any other benefits

Also do you owe them any money?

are the meters key meters

check by pressing the button on the meters to see if money is owed from someone else also you should be able to see how much a pence per unit is

plaese post back

regards DK

[clawingitback]

Wouldn't it be nice if the government who were supposed to implement this ruling did the honourable thing and imposed a directive on all those companies who receive this payment to just refund the relevant amounts to the key holders of prepayment machines and save a repetition of this debacle over bank charges. This would make sure everyone who has paid gets this back without putting them through the horrors of having to fight with legal jargon they know little or nothing about.

 

The people who have got their bank charges back or who have challenged loan companies and credit card companies have had to have a constitution of steel and time on their hands to do this. For once why isn't this directive, apparently in place since 2004, just put right by the powers that be upon the businesses concerned and save a lot of people a lot of stress and concern?

 

I am sick of having to fight for everything no matter how unjust, unlawful or irresponsible it may have been by the parties concerned.

 

Sarah

 

I think the general answer to your point is that politicians are corrupt and that plenty of sordid deals go on in the background and that vested interests would be threatened by giving consumers any more power, let alone the ability to claim back what is rightfully theirs. That's what democratic capitalism amounts to and it serves best those with the control, the money and the power.

 

Your only chance at redress is to jump through a thousand hoops to get any justice whatsoever.

 

Sorry. That was my first post and I've got it out of my system, for now.

[andrew1]

I think the general answer to your point is that politicians are corrupt and that plenty of sordid deals go on in the background and that vested interests would be threatened by giving consumers any more power, let alone the ability to claim back what is rightfully theirs. That's what democratic capitalism amounts to and it serves best those with the control, the money and the power.

 

Your only chance at redress is to jump through a thousand hoops to get any justice whatsoever.

 

Sorry. That was my first post and I've got it out of my system, for now.

 

Well said & welcome to the community of CAG.

[pugsley]

Thanks for the information, this definately needs dealing with asap

 

 

In what way can an individual have recourse to EU Law?

 

The EU Commission has to power to prosecute a member state before the European Court of Justice if fails to properly implement a Directive or if it passes a law that contravenes the provisions of a Directive. If that prosecution is successful, the European Court of Justice can then fine the member state. A member state's failure in this regard can be

brought to the attention of the EU Commission by an individual

 

 

so has it been brought to the attention of the EU Commission yet?

[DCA-KING]

Contacted ofgem to find out what the true price diffrence is and then a letter off to swalec

Regards DK

[DCA-KING]

Just contact ogem they say they dont haver any true figures and if theres any they would be on or website so we cant help you

another cigar whiskey guy looking out for there selfs

[meg&mog]

i'm with british gas and have a prepayment meter.

 

i'm sticking in about £20 - £25 per week - thats my electric.

 

my gas is higher and thats prepayment too

 

im on income support with kiddies and its freezing sometimes but im frightened to put the gas on as it sucks it - i have to space it out.

 

i asked british gas if i could have the meters out and have normal ones in so i could pay by direct debit. these were in here when i moved in.

 

they said i had to go through a credit check first.

 

they came back and told me it would cost me £300 for the electric one and £200 for the gas one. if i was seen as a good payer for 12 months i would get it back.

 

where the hell can i get that from i told him im on income support. he just said he was sorry but thats the way it goes...

 

i would change supplier but i dont know whos cheaper - the men are supposed to deal with this problem - and i aint got one - im not good with this stuff.

 

 

Npower took my pre payments meters out for free then about a month later i changed supplier