Energy companies are burying the details of charges on late bill payments deep in their terms and conditions, to the extent that households are unaware of the penalties. Research from comparethemarket.com shows that energy providers are charging interest of, on average, 4% APR to customers who are late in paying their bills.
Most households pay their energy bill via direct debit, thereby avoiding the risk of overdue payments. However, nearly a quarter (24%) pay their energy bills by another method, either through online payment, prepayment meter, at the bank, or by phone.
The majority of the terms and conditions of the major energy companies, analysed by comparethemarket.com, contain the clause that the provider can charge a customer interest on unpaid bills if they do not receive payment within a specified timeframe following the bill being dispatched – usually 14 or 28 days.
However, terms and conditions of energy providers are an average of 8,130 words long and on average take up 14 pages – these documents would take nearly half an hour to read in full. With the clause around late payments appearing as far down as page five, on average, many households are not aware of these charges. According to theresearch, over two thirds of consumers (67%) are not aware that energy companies charge interest on their bill should they miss a payment.
Even amongst those who are aware of the interest rate levied on missed payments, nearly seven in ten people (69%) have no idea how much these charges cost. Interest rates vary between 0% and 8% depending on supplier.
There were some exceptions, notably nPower which kept its terms and conditions document down to only one page and does not charge interest on late bills. The strength of nPower’s T&Cs highlights the wide gap that exists between providers on how they communicate charges to customers.
According to Ofgem the average Standard Variable Tariff is around £1,086 per year, or around £90 per month, depending on the level of household usage.
Peter Earl, Head of Energy at comparethemarket.com, said: “This bill bonanza that energy companies have been enjoying at the expense of late payers is just another example of an industry which too often treats its customers with contempt. Whilst the principle of charging interest on late payments isn’t unreasonable, there’s no excuse for hiding charges. Most consumers are understandably focussed on the cost of energy, few people are aware of the late fees and charges levied on households who don’t comply with providers’ lengthy terms and conditions.
“Asking customers to read pages and pages of small print before agreeing to the terms of a basic utility, like energy, is pretty unreasonable. Long policy documents are incredibly off-putting and often it might seem much easier to ignore and hope for the best. But T&Cs do contain important information, including details of further costs and charges, which can catch consumers out and leave them in serious debt. Whilst the majority of providers do charge for late payment, by doing their research, consumers can make sure they choose the option with the lowest penalties.”
| Q3 2016 Market Share | Number of Pages* | Number of Words | Time to Read (minutes) | Annual Interest Rate | On what page is interest mentioned | |
| British Gas | 23% | 14 | 10,080 | 34 | 3% | 4 |
| EDF | 12% | 12 | 6,388 | 21 | 8% | 6 |
| E.ON | 14% | 14 | 7,971 | 27 | 0% | 0 |
| Npower | 10% | 1 | 1,429 | 5 | 0% | 0 |
| Scottish Power | 11% | 19 | 10,246 | 34 | 2% | 12 |
| SSE | 15% | 27 | 11,206 | 37 | 4% | 8 |
| Co-operative Energy | 1% | 14 | 7,388 | 25 | 3% | 9 |
| Extra Energy | 1% | 11 | 10,380 | 35 | 4% | 3 |
| First Utility | 3% | 23 | 9,968 | 33 | 8% | 4 |
| OVO | 2% | 14 | 6,651 | 22 | 4% | 8 |
| Utilita | 2% | 10 | 10,003 | 33 | 4% | 4 |
| Utility Warehouse | 2% | 6 | 5,852 | 20 | 5% | 3 |
| Average | 14 | 8,130 | 27 | 4% | 5 |
Ofgem Bills, prices and profits. Based on average of dual fuel, direct debit and available paper tariffs from the six large suppliers at March 2017.
