Utilities and telecoms customers overcharged by £24.1bn, claims Citizens Advice

The charity has called for companies to refund customers through a rebate on their bills and for regulators to stop it happening again.

It found Ofgem made errors in setting price controls for energy networks, resulting in energy customers being overcharged £7.5bn over an eight-year period. After the charity highlighted these concerns, three energy network companies returned some money to consumers.

The same errors were made regulators in other markets including water, broadband and phone networks over the past 15 years, the charity reported.

It said misjudgements were made by Ofgem, Ofwat and Ofcom on key decisions, which meant customers were left paying too much for the pipes and wires that connect energy, broadband, phones and water to their homes.

The charity said the overpayments partly occurred because regulators made forecasting errors. They predicted that costs, such as debt, would be higher than they in fact were. The regulators also overestimated how risky these businesses were for investors, Citizens Advice said.

Citizens Advice is recommending that, instead of forecasting costs, regulators should use available market data to calculate costs and adjust their estimates of investment risk.

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.

Ofgem said that while it “does not agree with Citizens Advice’s estimates of excess profits”, it welcomes their report and recommendations.

“Ofgem remains determined to drive the best deal possible for consumers,” it said. “Overall, energy network regulation has delivered for consumers, with £100 billion invested, power cuts halved, record customer satisfaction and reduced costs.”

Ofwat, for its part, said it "does not recognise the figures put forward by Citizens Advice or how they are arrived at".

"The National Audit Office (NAO) examined these issues previously and reported that customers could have overpaid by up to £840m. We took on board the recommendations of the NAO and the Public Accounts Committee and, as a result, companies returned millions of pounds to customers."

Ofcom said in a statement: “Our decisions have helped customers benefit from more choice and better services. That involves making complex forecasts on the cost of finance, which Citizens Advice have found to be largely accurate. We’ll continue to encourage investment in broadband, while protecting customers from high charges.”

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.”