Some Energy Suppliers Are Overcharging Customers, U.K. Says

(Bloomberg) -- The U.K. says some energy suppliers are overcharging customers, effectively borrowing from households at a time when living costs are surging.

Those suppliers have been increasing monthly direct debits “beyond what is required,” business secretary Kwasi Kwarteng said on Twitter.

Regulator Ofgem has been reviewing the behavior of companies, and suppliers have three weeks to respond. The regulator has the power to issue fines if it finds evidence of wrongdoing.

Rising energy costs are driving a cost-of-living crisis in Britain. Overall, the average family will be 1,100 pounds ($1,382) worse off over the next 12 months, according to the Resolution Foundation think tank. That's going to cause mounting debt as people struggle to pay. The government has pledged a 9 billion-pound package to help with energy bills, but it has been criticized as being not enough.

Bills paid automatically by direct debit are averaged out over the whole year to avoid big payments in winter, when energy use is higher. Overcharging has come into the spotlight since the U.K.'s price cap, a maximum level for gas and electricity, jumped April 1.

A customer can only be charged for the energy they have used, so those being overcharged will build up a surplus. Suppliers have to pay this credit balance back if requested, but in the meantime there's nothing to stop companies from using the balance as working capital.

U.K. Energy Bosses Clash Over How to Protect Customer Cash

Under increasing pressure from companies like Centrica Plc and the U.K. unit of E.ON SE, Ofgem is considering protecting these customer balances in case a supplier goes bankrupt.