Key Energy stocks to watch as Ofgem demands action over direct debits

Highlights

• Ofgem demand action over suppliers’ way of charging customers direct debits.
• 5 out of 17 big suppliers have moderate or severe issues in their way of charging customers.
• Within the span of the next two weeks, the affected energy suppliers would have to put forward their plans of action.

Energy regulator Ofgem has instructed several energy suppliers to immediately take action following an evaluation which revealed a variety of flaws and weaknesses in the manner in which customers direct debits are charged by them. Minor concerns were revealed for majority of the 17 big energy suppliers, but it was observed that five of them have moderate or severe issues, which has pushed Ofgem to call for action instantly.

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Within the span of the next two weeks, the affected energy suppliers would have to put forward their plans of action showing how they are planning to deal with the said issues. The effectiveness of the plans would be inspected by Ofgem itself. Even though no proof of unreasonably high direct debits has been observed by Ofgem yet, the regulator has still urged the suppliers that have raised their direct debits by over 100% to go for a review for the sake of providing further assurance to customers.

Wherever it seems necessary, Ofgem expects the suppliers to correct the errors, which includes making repayments to customers. Ofgem acknowledges that numerous factors may be responsible for the direct debit hikes faced by consumers, which include the new tariff changes and elevated debit balances etc. However, the onus lies with the suppliers to confirm whether the direct debits are appropriately set or not. Additionally, they should ensure that they communicate well with the customers and keep them in loop in case of any changes.

While Ofgem calls for action, UK investors can keep an eye on the following energy suppliers.

Centrica plc (LON: CNA)

The shares of the energy services provider, Centrica plc, gained 2.51% at around 8:30 A (GMT+1) on 14 July, and were trading at GBX 86.48. The company, which falls under the FTSE 100 index, holds a market cap of £4,983.62m. Centrica has performed really well over the past 12 months and has provided its shareholders with positive returns of 66.44% and 21.05% as of 14 July on annual and YTD basis, respectively. Its EPS also lies in the positive zone, at 0.21.

SSE plc (LON: SSE)

The shares of the Scotland-headquartered energy company, SSE plc, plunged by 0.06% at around 8:40 AM (GMT+1) on 14 July, and were trading at GBX 1,760.00. The company, which falls under the FTSE 100 index, holds a market cap of £18,801.88m as of 14 July. SSE has performed decently over the past 12 months and has provided its shareholders with positive returns of 13.24% and 8.03% as of 14 July on annual and YTD basis, respectively. Its EPS also lies in the positive zone, at 2.87.

Drax Group plc (LON: DRX)

The shares of the leading power generating business, Drax Group plc, were trading at GBX 712.50 at around 8:50 AM (GMT+1) on 14 July. The company, which falls under the FTSE 250 index, holds a market cap of £2,855.12m as of 14 July. SSE has performed considerably well over the past 12 months and has provided its shareholders with positive returns of 65.58% and 17.69% as of 14 July on annual and YTD basis, respectively. Its EPS also lies in the positive zone, at 0.20.

Source: https://www.ofgem.gov.uk/publications/press-release-ofgem-requires-improvements-energy-suppliers-customer-direct-debits