Does your energy company owe you money?

27 March 2009

Energy suppliers have been rapped by their regulator for increasing customers’ direct debit payments without explaining why and making it hard for people to get their money back.

Earlier this week, a report by consumer group Which? claimed energy companies are using direct debit payments as interest-free loans, with the average gas customer in credit by £84. It accused firms of setting direct debit payments too high. Energy companies denied the claims.

Now, the regulator Ofgem has waded into the battle, with its own criticism of the way energy companies take overpayments from customers.

While it says there is no evidence that suppliers are taking more money from direct debit customers than they are due, it criticises for not communicating efficiently with customers. This has left many households struggling to understand why they are being asked to pay more, especially when they may already be well in credit on their account.

Ofgem also expresses questions about how easy it is for these people to get their money back. It is now demanding that suppliers to do more to make the grounds for refunds clearer and to give consumers more choice on how their credit balances should be used or repaid.

Alistair Buchanan, chief executive of Ofgem, says it now expects suppliers to ensure they adjust direct debits on a timely basis to avoid debt build-ups when prices rise and encourage customers to provide up-to-date meter readings, which lead to more accurate payment plans being set.

“[Suppliers’] explanations of the payment increases and their practices on refund policies are wholly inadequate,” he says. “We are calling on suppliers to meet and beat our best practice and will take new licence powers to back this up if necessary.”

Which?, however, stands by its claims that direct debit demands are too high. “We remain concerned about the size of credits that are being allowed to build up on some customers' gas and electricity accounts,” says James Tallack, senior researcher at Which?

The body that represents energy companies says its members are already making moves to be clearer about why direct debit payments are increase.

Garry Felgate, chief executive of the Energy Retail Association, says: “Ofgem’s report will hopefully lay to rest customers’ concerns about this payment method, as the vast majority of direct debit users appreciate being able to budget and pay for their energy this way.”

Could you get money back?

Half of all energy customers pay for their electricity and gas by direct debit, and by doing so often benefit from reduced bills.

Energy companies base your direct debit payments around an estimate of what they think your electricity and/or gas usage will be over the year. The problem is, they tend to overestimate your usage.

This is actually a good thing; if suppliers underestimated usage that you could end up being hit with an additional bill at the year-end. The amount of money that you are in-credit by is used by your supplier as a buffer in case there is any shortfall during the winter months, when the amount of energy you use increases. If the money isn’t used, then it will be refunded to you at the end of the year.

However, while that money is acting as a buffer on your energy account, it isn’t earning any interest. So, claiming it back now could be an opportunity to bolster your cash reserves.

1. Get a meter reading

Direct debit payments are estimates, so you need to show your energy company exactly how much you are using. Once you’ve carried out a meter reading, simply pick up the phone and let your supplier know.

2. Find out if your account is in-credit

If it is, then you are entitled to ask for this money to be refunded. However, be aware that you might be refused. If you request a refund during the summer months, your supplier might argue that it needs to keep your account in credit to offset a higher energy usage during the winter months. A refund could cause you to go into debt later in the year.

If you are refused a refund and feel this is unjustified, then make sure you ask for a full explanation. Threatening to take your custom elsewhere might also help, but do try and work with the energy company. Getting into debt on your account should be avoided wherever possible unless you fancy an additional bill at the year end.

3. Get your direct debit payments adjusted

If it transpires that your direct debit payments are too high, you can make a formal request for your supplier to lower these.

Do this formally in writing; this will indicate that you are serious about getting your direct debits adjusted. Consumer Focus, the consumer rights organisation, states: “suppliers should take reasonable care when administering your account”. This includes ensuring your direct debit payments are fair.

Make sure you continue to take meter readings every three months, and pass these on to your supplier.

4. Make a complaint

If you wish to complain, then the first step is to detail your gripe in writing to your energy supplier. It is best to see if the problem can be resolved directly. If not, then contact the Energy Ombudsman, which adjudicates disputed customer claims for compensation.

5. Changing supplier

Take a new meter reading on the day you change your energy supply. Compare this with the readings on your final bill from your old supplier and the first bill from your new supplier. If you notice a significant difference, then contact your supplier and ask why.

 6. Know your rights

The direct debit guarantee means that energy suppliers cannot increase your monthly payments without giving you at least 10 working days’ notice first. If your supplier has broken this guarantee, then you can make a complaint to the Energy Ombudsman and potentially claim compensation. 


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