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Will Ofgem’s new proposals to refund credit balances save you money or will bills go up?

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Proposals that could see energy credit balances of around £1.4billion automatically returned to households has been criticised by an industry insider who says the move is simply addressing the symptom but not the root cause.

Under new plans from Ofgem, suppliers could be limited to the amount of customer credit balances they can hold, which the regulator says could result in as £65 per household on average being returned.

However, an industry insider said the plans have only been put in place due to direct debits being far too high for customers in the first place.

They believe the regulator has made the decision to return credit balances as it suspects some suppliers are holding excessive credit balances to fund their tariffs or cover debt.

Whilst Ofgem's proposals look to return money to customers, it could result in bills going up

Whilst Ofgem’s proposals look to return money to customers, it could result in bills going up

Ofgem’s proposals will mean suppliers can retain credit balances that are enough to cover their customers consumption through the winter but no more.

This can be achieved if customer’s direct debits are at the correct level – however, many aren’t and suppliers that currently need higher direct debits to fund their cheap tariffs would be deemed non-compliant if the suggested changes go through.

Under the new rules, they will then have to increase the price of their tariffs to cover their debt, which reduces credit balances, or be forced to refund the money by the regulator.

It is thought the latter is unlikely to happen as some suppliers simply won’t have the cash to do so and will therefore likely go bust.

As such, the remaining suppliers pick up the cost of credit balances and, ultimately, will have to increase prices meaning bills go up.

Refunding thousands, if not millions, of pounds will be difficult for a number of suppliers after many faced a difficult financial year as they had to help support customers who could no longer pay their bills. 

At present, the average profit margin for suppliers is -1.4 per cent, highlighting the struggle many face, especially after the pandemic. 

The insider said: ‘Suppliers are actually loss making and not sitting on lots of cash and so the reality is likely that zero will be returned to customers and the cheapest tariffs will disappear.’

They added Ofgem did not consult providers about these plans before announcing them, leaving many providers wondering how they would stump up the money the regulator is asking for. 

Suppliers could be limited to the amount of credit balances they can hold, Ofgem's plans say

Suppliers could be limited to the amount of credit balances they can hold, Ofgem’s plans say

This is Money asked Ofgem how it calculated that £1.4billion would be returned to customers. 

It said its research found as much as £1.4billion was held in surplus credit balances in October 2018, a figure based on suppliers holding £2.4billion in fixed direct debit credit balances in total. 

To calculate what was and was not surplus, it requested information from suppliers on what their fixed direct debit customers’ consumption was in each month of the year as a proportion of the entire year.

From this, it modelled what credit balances were required in each month and compared this to what suppliers were actually holding.

A spokesperson for Ofgem said: ‘For suppliers doing the right thing and only collecting the credit balances they need, our proposals will not affect them.

‘Where suppliers are currently relying on surplus credit balances – and let’s be clear that is consumer overpayment – to sustain their business, they will face the cost of the risk they are putting onto the rest of the market.

‘This will mean they have less access to working capital and our proposals will bite on them.’ 

It said its consultation also includes a credit balance threshold to limit the total amount of credit balances suppliers can hold at set points during the year, again to stop over collection.

Suppliers would be required to protect any credit balances they collect above the threshold, such as through an escrow account or some form of financial guarantee.

This is Money also asked whether it would be more beneficial for energy suppliers to ensure they set direct debits at the correct level to begin with to avoid a massive debit.

Many are on estimated bills that mean they are either underpaying or overpaying.  

Ofgem said suppliers must currently set fixed direct debits based on the volume of energy they expect the customer to use over the year.

They must base this estimate on the best and most accurate information available to them including the most recent meter reading.

Ultimately, if the proposals are confirmed and go ahead, the regulator said it will work with suppliers during the implementation period adding it has ongoing conversations with all suppliers to ensure they are compliant with regulations.

If suppliers fail to abide by the regulation, it says it can step in and take formal action. This can start with a fine and if non-compliance continues, ultimately it could lead to the regulator revoking their licence.

Again, this could lead to less providers in the market meaning less competition and higher prices. 

The insider said: ‘The new plans are addressing the symptom and not the root cause. It is a vicious cycle that is getting worse.’

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British ex-pat, 67, is forced to DESTROY his Spanish home two months after his wife died from cancer

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A British ex-pat has been forced to knock down his £130,000 Spanish home two months after his wife died from cancer.

But the situation for 67-year-old Gurney Davey, from Suffolk, could get worse because he is facing six months in prison after a mayor illegally gave him planning permission for the house.

‘I was distraught at first, my blood pressure was sky high and then I lost my wife,’ Mr Davey said this week as he was demolishing his home near Tolox, Malaga.

Gurney Davey, 67, has been forced to knock down his £130,000 Spanish home two months after his wife died from cancer

Gurney Davey, 67, has been forced to knock down his £130,000 Spanish home two months after his wife died from cancer

Despite Friday’s demolition also costing him €1,600, he added that it had actually come as ‘some sort of relief’ having fought the legal battle since 2004, over the house he built in 2003. 

It was then that legal firm, Manzanares, informed him he would be getting a licence for an ‘almacen’ (or storeroom), which would allow him to build the house.

‘We thought we had done everything right. We got legal advice and went through a lawyer in order to get permission to build the home,’ Davey explained. 

But he was later told that his house was one of around 350 that were illegally given planning permission by the former mayor, Juan Vera, who was eventually handed a prison sentence of his own.

Mr Davey was told his house had to be demolished for himself to avoid a six-month prison sentence, with the news coming just after his wife, Diana, died from bowel cancer at the age of 71.

‘Diana fought breast cancer for six years before bowel cancer – I am sure the stress brought it on.’ 

‘But thankfully it is now over,’ he explained. ‘It has been going on for so long now, I’ve finally come to terms with what needs to be done. 

‘Having it demolished was actually a relief,’ he added.

As he still owns the land, he can still live on it – just not in a house.

Despite Friday's demolition also costing him €1,600, he added that it had actually come as 'some sort of relief' having fought the legal battle since 2004, over the house be built in 2003. Pictured: Mr Davey's home in Spain before it was demolished on Friday

Despite Friday’s demolition also costing him €1,600, he added that it had actually come as ‘some sort of relief’ having fought the legal battle since 2004, over the house be built in 2003. Pictured: Mr Davey’s home in Spain before it was demolished on Friday

Mr Davey was told that his house was one of around 350 that were illegally given planning permission by the former mayor, Juan Vera, who was eventually handed a prison sentence. Pictured: Mr Davey's home in Spain after it was demolished on Friday

Mr Davey was told that his house was one of around 350 that were illegally given planning permission by the former mayor, Juan Vera, who was eventually handed a prison sentence. Pictured: Mr Davey’s home in Spain after it was demolished on Friday

Now, the father-of-three is planning a minimalist life staying in a converted van, so that his five dogs still have the space to roam.

‘This land is my home, it is my life and these dogs are all I have left.’

Whether or not he still faces a prison sentence, is yet to be confirmed.

The ex-pat only found out about the potential six-month sentence when a court document was delivered to a neighbour’s house.

‘I went straight to Tolox town hall with it. They told me I shouldn’t have received it yet,’ he recalled. ‘They said they were going to be sending the notification to me once they had stamped it.’

He had never been told about the court case that followed on from a Guardia Civil denuncia for an ‘illegal build’, but Davey’s two-bed home should never have been built according to the Malaga court.

Now, the father-of-three is planning a minimalist life staying in a converted van, so that his five dogs (pictured) still have the space to roam

Now, the father-of-three is planning a minimalist life staying in a converted van, so that his five dogs (pictured) still have the space to roam

In 2016, and then again in 2017, Davey was ordered to knock down his house, but, in common with a neighbour, he waited for more details.

While his Spanish neighbour, Irene Millan, 29, did eventually hear from the court again, she was given six months to ‘legalise’ her property – an option Davey was never given.

However, his neighbour’s apparent good luck turned into a poisoned chalice.

Having spent €20,000 with the town hall to legalise the dwelling, the court finally refused to accept the new paperwork provided by the council.

Instead, demolition was ordered – which went ahead last week.

To add insult to injury Irene’s 54-year-old father, Manuel Millan, whose name was on the deeds, was also sentenced to six months jail and handed a fine of €6 a day for a year.

Whether or not he still faces a prison sentence, is yet to be confirmed. The ex-pat only found out about the potential six-month sentence when a court document was delivered to a neighbour's house

Whether or not he still faces a prison sentence, is yet to be confirmed. The ex-pat only found out about the potential six-month sentence when a court document was delivered to a neighbour’s house

As he still owns the land, he can still live on it - just not in a house. Pictured: Mr Davey, a former builder, uses a JCB digger to demolish his own home

As he still owns the land, he can still live on it – just not in a house. Pictured: Mr Davey, a former builder, uses a JCB digger to demolish his own home

The couple, originally from Suffolk in the UK, spent £130,000 building their property.

‘It came as a package – a plot with a new home on it.’

Davey admits he and his wife were perhaps naive to follow the advice of their lawyer.

The lawyer, from legal firm Manzanares, told them that planning permission would be applied for as an almacen – or ‘warehouse’.

Mr Davey (pictured) was told his house had to be demolished for himself to avoid a six-month prison sentence, with the news coming just after his wife, Diana, died from bowel cancer at the age of 71

Mr Davey (pictured) was told his house had to be demolished for himself to avoid a six-month prison sentence, with the news coming just after his wife, Diana, died from bowel cancer at the age of 71

This way it would come under the remit of Tolox town hall, which would give permission and later they could ‘legalise’ the property.

The language of one legal letter suggests this would be a mere formality, but the property never got legalised.

In fact, the Tolox mayor of the time, Juan Vera, has since been jailed and fined for his part in a scheme.

In most cases the mayor used the very same ‘lax’ procedure of applying to build an ‘almacen’ to try to keep the prying eyes of the Junta authorities away.

‘We thought that was the way things worked in Spain,’ said Davey, a retired builder. ‘We went to see a lawyer and got advice. It turns out that was not the smart thing to do.

‘Why would we deliberately try to build illegally? It makes no sense that we would sell up everything in the UK and risk it all.’

Mr Davey had earlier said that he was forced to ask the town hall for permission to knock his own property down.

‘I will do it myself. I will borrow a JCB from someone and flatten my home of the past 17 years. I will not let the town hall do it and charge me more money.’

It is not the first time British expats have had their homes demolished in Andalucia, with the Priors, in Almeria, the most famous victims.

They still live in the garage of their house today, over 10 years since the house was knocked down in Vera. 

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Two teenagers died after separate incidents in Dublin and Waterford

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Two teenagers have died after separate incidents in Dublin and Waterford on Wednesday.

Gardaí in Ballyfermot responded to a call at an equestrian centre at Tay Lane, Co Dublin, at about 2pm.

Dublin Fire Brigade and the National Ambulance Service attended the scene and provided medical assistance to a 15-year-old girl who was injured during an exercise event.

She was removed to Children’s Health Ireland at Crumlin, where she later died.

Gardaí said the coroner has been notified. The Health and Safety Authority (HSA) has also been notified and will carry out an examination on Thursday.

Gardaí said investigations are ongoing. A file will be prepared for the Coroner’s Court.

Separately, gardaí and emergency services attended the scene of a workplace accident in Dungarvan, Co Waterford on Wednesday afternoon.

A boy was pronounced dead at the scene.

The HSA has been notified and will carry out an investigation. A file will be prepared for the coroner.

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Tritax EuroBox acquires Swedish logistics property for €47m

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Tritax EuroBox continues to expand its presence in the Swedish market with a €47m acquisition. The asset held freehold has a total gross internal area of approximately 28,900m² and comprises two purpose-built logistics facilities (one of 16,200m² and the other 12,700m²), located in the heart of the prime logistics location in the Port of Gothenburg. 

 

The Port of Gothenburg has been ranked as the most attractive logistics location in the Nordics for 20 years by Intelligent Logistik, the leading Nordic logistics media platform. There are currently no vacant logistics buildings in the port area. The Port is home to Scandinavia’s largest container terminal, which is forecast to grow over the coming years. The buildings are fully let to Agility AB, Nordicon AB and Vink Essaplast Group AB, generating a total annual rent of €1.79m on leases with a weighted average unexpired lease term of six years.  The rent reflects a rate of €62.50psm per annum.  All leases are annually indexed to 100% of Swedish CPI.

 

Nick Preston, Fund Manager of Tritax EuroBox, commented: “We are delighted to acquire our first asset in the Nordics which aligns with our disciplined investment approach and our long term strategic goals. The asset held freehold is located in the region’s strongest logistics market and offers asset management upside through working closely with the occupiers to achieve their business plans and increase rents to market levels. We expect to see continued strong market rental growth in the Port of Gothenburg, due to the natural constraint of land supply in the port area, and the increasing demand from occupiers. The Port of Gothenburg has a clear plan for growth, with significant infrastructure investment committed, further strengthening this location.”

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