Energy giants are hoarding £4.5 billion of YOUR cash
As households feel the squeeze, energy giants are hoarding £4.5 billion of YOUR cash. Here is how to get it back
- Two-thirds of homes in credit with their energy supplier, according to Uswitch
- Companies have doubled amount kept as buffer this year to average of £249
- More than half of all homes now foot their energy bills via direct debit
An energy crisis is gripping the nation. Yet, as households feel the squeeze, gas and electricity suppliers are demanding more cash than they need and are sitting on a £4.5 billion pile of customer credit – up from £1.4 billion last spring.
Two-thirds of all homes are in credit with their energy supplier. Companies have doubled the amount they keep back as a buffer this year to an average of £249, according to comparison website Uswitch. For many households, the credit adds up to more than £1,000.
The reason for this imbalance is that more than half of all homes now foot their energy bills via direct debit, as it is a convenient way to pay. Although it provides an easy solution to ensure that bills are automatically paid every month, it also favours energy suppliers as they can take out more money than is being spent consuming energy.
Tough capital adequacy requirements being introduced by energy watchdog Ofgem to try to safeguard against energy companies going bust in the future are also expected to lead to direct-debit demands being ramped up even higher from April – when the average Government energy-price guarantee is raised from £2,500 to £3,000 a year.
As households feel the squeeze, gas and electricity suppliers are demanding more cash than they need and are sitting on a £4.5 billion pile of customer credit – up from £1.4 billion last spring
Consumers will always get any credit balance returned should their gas or electricity supplier collapse. An Ofgem spokesman says: ‘Protecting consumers is at the heart of our rules and consumers can ask for surplus credit balances to be returned to them at any time if suppliers owe them money.’
KEEP AN EAGLE EYE ON THOSE STATEMENTS
Energy suppliers wasted no time in hiking up direct debits in response to the Russian invasion of Ukraine – with the cost of energy increasing by 54 per cent last spring.
Ofgem found customers on a standard variable tariff saw energy price direct debits soar even higher – by 62 per cent between February and April to cover these rising costs. Half a million people got direct debit hikes of more than 100 per cent.
The regulator said suppliers such as Ecotricity, Good Energy, Green Energy UK and Utilita Energy were among the worst offenders – and were ordered to recalculate the maths behind their direct-debit rises. Others, including Bulb, Eon, Octopus Energy, Outfox the Market, Ovo Energy, Shell and Utility Warehouse, were also criticised for ramping up demands.
If you are a customer of one of these gas and electricity suppliers – or any other – check on payment increases by looking at bank statements and demand a cut to direct debits each month if you are building up credit.
Remember, direct debits are taken so that customers build up credit during warm summer months when gas and electricity usage is lower, and this helps to smooth out against the colder winter when the usage is higher. When energy reliance is close to its peak, now is a good time to review if consumption matches bills.
Check on payment increases for gas and electricity suppliers by looking at bank statements and demand a cut to direct debits each month if you are building up credit
DON’T BE AFRAID TO ASK FOR YOUR CREDIT BACK
Contact your energy supplier by telephone, email or internet ‘live chat’ to demand your money back, armed with an up-to-date meter reading. Suppliers typically review accounts every year using meter readings and may automatically refund credit balances. But this should not stop you accessing any credit balance beforehand – it is your money and the annual review is not a valid reason for suppliers to fob you off and not pay you back.
But be aware there may be a ‘buffer’ of a credit balance that must be left behind – so you do not leave the supplier with nothing. For example, British Gas demands £75 in credit as a buffer for future energy bills.
The £400 ‘energy bill support scheme’ grant from the Government paid in the autumn to households is also not included in suppliers’ debit payment calculations. If an energy supplier turns down a request, demand a full explanation as to how it can justify this. Raise a formal complaint with the firm to get money back if you’re still not happy – before taking it to an ombudsman service.
Emily Seymour, energy expert at Which?, says: ‘We have heard concerning stories of consumers having energy direct debits miscalculated. Start any complaint with your energy company before escalating it further.’
The Energy Ombudsman can be contacted eight weeks after you have raised a complaint with your energy suppliers and it has not been satisfactorily resolved. Contact ombudsman-services.org or call 0330 440 1624.
Contact your energy supplier by telephone, email or internet ‘live chat’ to demand your money back, armed with an up-to-date meter reading
TELL YOUR SUPPLIER YOU WISH TO LEAVE
If you believe your energy company is pocketing more than it should and is making excuses for not paying up, another option is to tell it you wish to leave.
Unfortunately, the cost-of-living crisis means there are no great energy deals out there – the energy price cap is keeping average household bills at £2,500 – but neither will you pay more money if you decide to move elsewhere.
Your gas and electricity suppliers must produce a final bill within six weeks of you switching to another supplier – and pay remaining credit to your account within ten working days.
If the original supplier fails to pay the money owed in this timeframe, it must also pay an extra £30 to you in compensation, according to Ofgem.
Comparison websites, such as MoneySuperMarket and Uswitch, can provide options on which new supplier you might change to if you provide details of your latest energy bill and postcode.
The entire process typically takes 21 days, which includes a 14-day cooling-off period when you can still cancel after signing up. You will not notice any disruption to your gas and electricity supply.
Before taking the plunge of leaving, it is important to ensure you are not signed up to a lengthy contract with an exit fee if you want to escape early. If this is the case, the best advice is usually to save money by staying put.
If you believe your energy company is pocketing more than it should and is making excuses for not paying up, another option is to tell it you wish to leave
BUT HAVING A HEALTHY BALANCE CAN PAY OFF
Before the energy crisis, some suppliers offered an incentive for customers to have credit balances by offering interest on the amounts salted away.
This rarely happens now, but an exception is Ovo, which still pays three per cent interest on balances up to £1,000 for the first year – rising to four per cent in the second year and five per cent from the third year and beyond.
This is a competitive savings rate that you would struggle to beat elsewhere, so it might be worth using it as a savings account to withdraw later on.
Another reason you may allow energy firms to keep money back is if you expect much nastier bills in the future. A Government energy price guarantee average of £2,500 a year rises to £3,000 in April. Although home energy bills will remain limited to this amount, the annual price cap suppliers can charge rises to £4,279 in January. Households should not notice this hike on their energy bills, but the taxpayer still ultimately picks up the tab because the difference between the price guarantee and the cap charged by suppliers is paid by the Government.
Which? energy expert Emily Seymour said: ‘Providers have to be able to justify why a customer’s direct debit payments are set at the level they are. This might be because they are anticipating that you will work through your credit over the winter, when households typically use more energy. We recommend building up plenty of credit over summer.
‘If you don’t believe that you will use enough energy to justify how much credit has built up in your account, contact your energy supplier and ask them to explain why your payments have been set at that level.’
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