Urgent alert to thousands of energy customers hit with ‘rip-off’ fees after using switching tool – are you affected?

Tens of thousands of homes could have been shifted to energy tariffs with expensive exit fees after signing up to a tool that is supposed to save cash.

It’s calculated that as many 20,000 energy bill payers using unregulated auto-switching services could have this year been moved to a tariff that was more costly than if they’d gone direct.

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Many were not even aware they were signed up to the tools. And some have not been able to move back to their original and cheaper provider, according to a report submitted to energy regulator Ofgem by Octopus Energy.

Auto-switching platforms were popular pre-2021 before energy costs jumped and since then many have stopped operating.  

Some charged fees for the service, but others appear to make money by charging customers a higher tariff than if they’d gone direct.

Earlier this year, Octopus Energy said it received a surge in complaints from customers who only realised they had switched supplier after receiving an email to say that a direct debit would be taken from their account in ten days time.

The firm said that in March there was a surge in the number of customers who at first seemed to initiate a switch away from Octopus Energy but then would promptly cancel that switch.

Octopus found that the deal in question was £90 more expensive than if the user had gone direct to the supplier.

The deal through the auto-switching service also had exit fees included, whereas there were none if the bill payer had gone direct to the firm.

It comes as more energy firms are offering price cap-beating fixed energy deals in the market.

After investigating, Octopus found most customers didn’t even know they were registered with the auto-switching service and didn’t understand why they were being changed.

Some signed up to the platform years ago and had not heard from them since. In other cases, bill payers appeared to be tenants in homes where the meter had been registered to a switching firm by a previous occupier.

Some customers who tried to cancel the switch were unable to do so because the supplier they were moving to was inundated by people calling to complain and were unable to respond in time, according to Octopus.

Switchcraft is one auto-switching service still operating.

A spokesperson for the company told The Sun: “Our mission is to eliminate the loyalty penalty and we firmly believe that a healthy switching market is the best way to drive bills down for all of us.

“Octopus’ false attack on auto switching may unfairly undermine competition at a time when they are pocketing hundreds of millions in profits, keeping prices high even though wholesale prices have plunged.

“We have never and will never switch anyone without their consent, and only make automatic switches which save you at least £50.”

Alexander Stafford, MP for Rother Valley and member of the Energy Security and Net Zero Committee has called for the auto-switching market to be regulated.

He told The Telegraph: “These firms are clearly acting against the wishes of customers who are powerless to stop these firms from ripping them off.

“With energy debt at the highest level ever, Ofgem cannot continue to stand idly by when the weight of evidence shows they must work fast to protect households.”

In the report Octopus said: “We are concerned that the projected volume of unconsented switching demonstrates a systemic failure in both freedom of choice and consumer protection.

“Suppliers who choose to outsource their customer acquisition activity to unscrupulous third parties, and continuing to do so even when it is clear that there is a detrimental impact to customers, must be held to account by Ofgem.”

A spokesperson for energy regulator Ofgem said: “We’re grateful to Octopus for bringing this issue to our attention and are carefully considering their findings.

“We expect both suppliers and third-party switching services to act in their customers’ best interests, and to make sure they are communicating with them clearly before initiating a switch.  

“We have also strengthened the rules that mean when consumers do decide to change their energy supplier it is a smooth process, and they are quickly compensated if it doesn’t go to plan.

“We’ll continue to work closely with industry and consumer groups and charities to make sure these rules are working to protect consumers in the coming weeks and months.”

HOW TO SAVE ON ENERGY BILLS

The market is opening back up after the energy crisis in 2021 and bill payers can now find lock into deals below the energy price cap.

Customers who lock into tariffs are charged the same gas and electricity rates during the entire term of the contract.

For example, Ecotricity is currently offering its Green 1 Year Fixed tariff, which costs a typical household £1,540 a year – £150 less than Ofgem’s price cap.

This comes with a £75 exit fee per fuel – £150 if you lock in with a duel fuel tariff.

Fixed deals protect customers from bill hikes if Ofgem were to increase the price cap in the future.

However, you may risk paying more if Ofgem’s energy price cap continues to fall in the coming months.

Customers who don’t want to commit to long-term fixed energy deals can consider flexible tariffs.

Cutting the cost of running appliances is another way to slash bills.

Some bill payers can also sign up to schemes where you will be paid to reduce energy usage at peak times.

For example, British Gas last month extended its Peak Save scheme offering millions of customers half-price electricity.