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Energy firms scrap discounts for model customers

Energy firms are scrapping their discounts for people who pay their bills on time, it has been announced

gas flame burning

Energy firms have blamed Ofgem for having to cut discounts

British Gas, EDF, E.ON, SSE and Scottish Power currently give customers money off their bill if they pay promptly each quarter. 

However, industry regulator Ofgem has now announced that due to new rules, energy companies will not be allowed to offer such discounts.  This could see cash-strapped households £40 a year worse off.

Discounts currently running

Currently, SSE customers enjoy a £5 discount per fuel each quarter if their bill is paid within ten days.

However, from 15 November this discount is to be scrapped. This happens to be on the same day that scheduled bill hikes come into force, and 7.3 million customers will see their average energy bill go up by 8.2%.

Meanwhile, Scottish Power dual-fuel customers currently have access to a £31.50 discount each year when they pay what they owe within 14 days. On 6 December, its customers will be subject to an 8.6% price rise, and this discount will also be abolished.

British Gas customers, who pay within 14 days of receiving their bill are rewarded with a 5% saving. This equates to a maximum of £7.50 off their bill each quarter, which translates to a total of £30 a year.

E.ON offers a 3% discount for model customers. This means that households with the energy giant can enjoy £40.59 off the average annual £1,353 gas and electricity bill.

In addition, EDF dual-fuel customers get £5.68 off their next quarterly bill if they pay within ten days. This accounts for a saving of £22.72 per year.

New Ofgem rules

In letters to customers explaining that these discounts will be scrapped, the energy companies lay the blame with Ofgem.

This is because they will only be allowed to offer two discounts in the future – one for choosing a dual-fuel tariff and another for managing an account online.

An Ofgem spokesperson commented: “Our investigation showed that customers were confused by the number and complexity of tariffs and the discounts that could be applied to them.

“But it’s not about getting rid of discounts. Suppliers should look to offer the discount in a different way — like by offering the cheapest deal they can.”

However, experts have warned that energy suppliers are using the new rules as an excuse to drive up profit.

Tom Lyon, energy expert at uSwitch, said: “There was always a danger that consumers could end up losing discounts or other benefits simply because they don’t fit in with Ofgem’s blueprint.

“Ofgem needs to be monitoring this and ensuring that the changes it is making don’t end up reducing the opportunity for consumers to save money on their energy bills.”

Paying each quarter is believed to be the most expensive way to meet energy bills. When consumers pay by direct debit each month, they estimate how much gas and electricity will be used over the year and divide this into 12 payments.

If they end up paying for more than they have used during the year, they receive a refund, but if they have underpaid they need to make up the difference.

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  • Decker

    Hmm, why is it the lowest paid families who get stuck with pre-payment meters get no ‘early payment discounts’ or choice of tariffs? They get stuck with the worst options and seem to be ignored in all the ‘investigations’ into energy companies price riggings.

    Get them to 1 tariff for all domestic, 1 for commercial, 1 for serious high users and publish each week what ‘they pay’ per kwh/therm (or whatever variants they want to use on issued bills).

    The issue of BIG businesses running all over the people who have to rely on them is out of control. Energy and fuel costs are key to all other costs of living, costs which don’t affect those running the companies as they can bare it, the majority of the population cannot without sacrifice, like water energy is now a basic requirement for life as is fuel and to make it unaffordable should be illegal and not just frowned on slightly by a toothless committee.

    The toothless part the companies know well, as they don’t flinch at toothless threats just move slightly to one side with the charges being issued in another way the company lawyers work out as being ‘legal and fair’.

    • DaSilvor

      Thats the bit that should be illegal. the extortionate charges for having a pre-payment meter.

  • Edwin C Dodd

    I’m on Card meters for both Gas and Electric, they cos me £30 a week each as I have a family of seven. £60 x 52 = £3120 a year.

  • Scipio32

    I don’t know why people use pre-payment meters, if you can afford to feed £40 a month into a meter than you can afford to pay £40 a month by direct debit.