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Utilities customers overcharged by £24.1bn

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30/05/2019
Citizens Advice has called for customers to be compensated after its investigation found that regulators have allowed water, energy, broadband and telephone networks to overcharge by £24.1 billion over the past fifteen years.

It said customers should receive a rebate on their bills and regulators needed to act to stop this happening again.

In 2017, a report by the charity found that Ofgem had made errors in setting price controls for energy networks, resulting in energy customers being overcharged £7.5 billion over an 8-year period. Three energy network companies returned money to consumers.

Today, Citizen’s Advice says the same errors have been made by Ofgem over a much longer period. Regulators in other markets including water, broadband and phone networks have made similar errors.

The problem, says Citizen’s Advice, is that many network companies face little, or no, competition to drive down prices. Instead, regulators tell the network companies how much they can charge by setting a price control. Customers then pay the charges for these networks as part of their water, energy, broadband and phone bills.

Calculation errors

Regulators have made forecasting errors and over-estimated the costs involved in supplying these services. The charity is recommending that, instead of forecasting costs, regulators should use available market data to calculate costs.

While several energy and water companies have taken steps to return some money to customers, Citizens Advice is calling for all firms to provide a voluntary rebate to their customers or face sanction from the government.

Gillian Guy, chief executive of Citizens Advice, said: “Regulator error has meant customers have been charged too much by energy, broadband and phone networks 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.”

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