How to get energy bill overpayments back, as giants hoard £4.5bn

An energy crisis grips the country. But as households feel the pressure, gas and electricity suppliers are demanding more money than they need and sitting on a stack of £4.5bn in customer credit – up from £1.4bn last spring.

Two-thirds of all homes have a credit with their energy supplier. According to comparison website Uswitch, companies have doubled the amount they withhold as a buffer this year to an average of £249. For many households, the credit amounts to more than €1,000.

The reason for this imbalance is that more than half of all households now pay their energy bills by direct debit, as this is a convenient way of paying.

While it provides an easy solution to ensure that bills are paid automatically each month, it also benefits energy suppliers by allowing them to withdraw more money than is spent on energy.

Strict capital adequacy requirements being introduced by energy watchdog Ofgem to try to prevent energy companies going out of business in the future are also expected to lead to direct debit requirements becoming even higher from April – when the government’s average energy price guarantee becomes increased from £2,500 to £3,000 per annum.

Consumers always get their credit back if their gas or electricity supplier goes bankrupt. A spokesperson for Ofgem said: ‘Protecting consumers is at the heart of our rules and consumers can ask for any excess credit to be refunded to them at any time if suppliers owe them money.’

KEEP AN EAGLE EYE ON THE ENERGY STATEMENTS

Energy suppliers wasted no time increasing direct debits in response to Russia’s invasion of Ukraine – which saw energy costs rise 54 percent last spring.

Ofgem found customers with a standard variable rate and saw energy direct debits rise even higher – up 62 percent between February and April to cover these rising costs. Half a million people received direct debit increases of more than 100 percent.

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 math behind their direct debit increases.

Others, including Bulb, Eon, Octopus Energy, Outfox the Market, Ovo Energy, Shell, and Utility Warehouse, also drew criticism for how they calculated direct debits.

If you’re a customer of one of these gas and electricity suppliers – or any other – check payment increases by looking at bank statements and request a discount on direct debits each month as you build credit.

Remember that direct debits are done so that customers build credit during hot summer months when gas and electricity consumption is lower, and this helps to smooth out the colder winter when consumption is higher. When energy dependency is nearing its peak, it is a good time to review whether consumption is in line with bills.

DON’T BE AFRAID TO REQUEST ENERGY CREDIT

Contact your energy supplier via phone, email or internet ‘live chat’ to claim your money back, armed with an up-to-date meter reading. Vendors typically review accounts against meter readings each year and can automatically refund credits. But this shouldn’t stop you from accessing a credit upfront – it’s your money and the annual review isn’t a valid reason for suppliers to rip you off and not refund you.

But keep in mind that there may be a ‘buffer’ of credit that must be left – so you don’t leave the supplier with nothing. For example, British Gas is demanding £75 in credit as a buffer against future utility bills.

The £400 ‘energy bill support scheme’ paid to households by the government in the autumn is also not included in the supplier payment calculations. If an energy supplier rejects a request, ask for a full explanation of how to justify it. File a formal complaint with the company to get a refund if you are still not satisfied – before going to an ombudsman service.

Emily Seymour, energy expert at Which?, says: ‘We’ve heard stories of consumers miscalculating their energy bills. Start a possible complaint with your energy company before escalating it further.’

You can contact the Energy Ombudsman eight weeks after you have made a complaint to your energy suppliers and it has not been satisfactorily resolved. Contact ombudsman-services.org or call 0330 440 1624.

TELL YOUR SUPPLIER YOU WANT TO LEAVE

If you think your energy company is dropping more than it should and are making excuses not to pay, another option is to say you want to leave.

Unfortunately, the cost of living crisis means there are no great energy deals – the energy price cap keeps the average household bill at £2,500 – but you also won’t pay more if you decide to move elsewhere.

Your gas and electricity suppliers must draw up a final bill within six weeks of your switching supplier – and transfer the remaining credit to your account within ten working days.

If the original supplier fails to pay the money owed within this time frame, they will also have to pay you an additional £30, according to Ofgem.

Comparison websites, such as MoneySuperMarket and Uswitch, can offer options as to which new supplier you could switch to if you provide details of your last utility bill and zip code.

The entire process typically takes 21 days, including a 14-day cooling-off period where you can still cancel after signing up. You will not notice any interruptions to your gas and electricity supply.

Before you take the plunge to leave, it’s important to make sure you’re not signed up for a long-term contract with exit fees if you want to escape prematurely. If this is the case, the best advice is usually to save money by staying put.

BUT HAVING A HEALTHY BALANCE CAN BE FREE

Before the energy crisis, some suppliers offered customers an incentive to have credit by offering interest on the amounts salted out.

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 onwards.

This is a competitive savings rate that is hard to beat elsewhere, so it may be worth using it as a savings account to withdraw later.

Another reason you may allow energy companies to withhold money is if you expect much more annoying bills in the future. A guaranteed government energy price averaging £2,500 a year rises to £3,000 in April.

While home energy bills will be capped at this amount, January annual price cap suppliers could charge increases of up to £4,279. Households should not notice this increase in their energy bills, but the taxpayer ultimately pays because the difference between the price guarantee and the ceiling charged by suppliers is paid by the government.

That? energy expert Emily Seymour: ‘Providers must be able to justify why a customer’s direct debit has been set at the current level. This may be because they expect you to work through your credit during the winter when households typically use more energy. We recommend building up enough credit in the summer.

“If you don’t think you’re going to be using enough energy to justify how much credit is in your account, contact your energy supplier and ask them to explain why your payments are set at that level.”

Energy supplies