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War of words erupts over multi-billion-pound networks consumer reimbursement call

Image: Getty.

Image: Getty.

A war of words has erupted between Citizens Advice and the UK’s energy networks companies over calls for consumers to be compensated for what the charity has described as years of overcharging.

Today consumer protection charity Citizens Advice has called for customers to be compensated, claiming they have been collectively overcharged to the tune of £24.1 billion over the last 15 years, predominantly as a result of regulator error.

It claims to have found that regulators presiding over the water, energy, broadband and telephone networks were allowed to overcharge consumers through as a result of misjudgements from the likes of Ofgem, Ofwat and Ofcom on key decisions, meaning customers essentially overpaid for the management and upgrade of pipes and wires that cover the length and breadth of the UK.

In total, Citizens Advice claims that between 2004 and 2019 energy customers will have been overcharged as much as £11 billion which, when added to water companies overcharging £13 billion and broadband and phone companies around £100 million, totals some £24.1 billion.

It squares the issue with perceived misjudgements from regulators in setting price controls in markets where there is little or no competition, with these costs passed onto consumers through charges added to bills.

Citizens Advice further claims that overcharging is a direct result of industry regulators making forecasting errors, predicting that costs incurred by network companies would be higher than they actually were, and over-estimating how risky these businesses were for would-be investors.

Gillian Guy, chief executive at Citizens Advice, said the issued had been going on “for far too long”.

“At a time when so many people are struggling to pay their essential bills, regulators need to do more to protect customers from unfair prices. They have started to take steps in the right direction but it is vital they continue to learn from their past mistakes when finalising their next price controls.

“Companies need to play their part in putting this multi-billion pound blunder right. They must compensate customers where they have been paying over the odds. If they don’t government needs to intervene,” she said.

However the charity’s analysis earned a strong rebuke from the Energy Networks Association (ENA), which has routinely taken issue with Citizens Advice’s calculations on the subject.

David Smith, chief executive at the ENA, said the charity’s calculations that underpin its research were “simply wrong” and built around numbers “plucked out of thin air”.

The analysis conveniently ignores the pace of change that has been taking place in our country’s energy infrastructure to deliver record levels of renewable energy and prepare for things like electric vehicles, producing an inflated figure as a result.

“The full cost of these changes is not reflected in this research. The fact is that overall network costs are down 17% since 1990, delivering savings for the public by running a world-class system of energy networks more efficiently. Meanwhile over the past six years alone more than £32 billion has been invested in Britain’s network infrastructure, helping drive economic regeneration in communities across the country whilst securing a sustainable and affordable energy supply for future generations,” he said.

The history between Citizens Advice and the ENA has been long standing. In July 2017 the charity published a stinging criticism of Ofgem’s network price controls, claiming that they opened the door for network companies to recoup billions in “unjustified profits”, just before the energy regulator teased a far stricter successor regime.

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