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Why does my energy company hold onto my money?

The other day I got a nice surprise when my energy bill arrived in the post, and found I’m in credit by £100! Great, but if I’m in so much credit, why is my money sitting in my energy company’s bank account?

I’m not the only person asking this question. Which?’s executive director, Richard Lloyd, is on Radio 5 Live all week talking about consumer rights, and on Monday a listener raised this precise issue.

Give me my money back!

So what can we do about it? Well I thought that one option would be to phone up the energy company in question and ask them to give it back. It wasn’t that easy.

They explained that the £100 I had in credit was only partly refundable because, although my gas bill was up to date, I hadn’t been billed for electricity since April. Confused? I am.

So I paid £66 on my last bill, submitted two meter readings shortly afterwards and got a statement saying I’m over £100 in credit. Wouldn’t this suggest that I paid too much on my last bill and that, not only should I get a refund, but they should also adjust my direct debit?

Well no, not according to Michael, the customer service rep who explained four times why this wouldn’t happen. I still don’t understand the reasoning. Perhaps it will all become clear when I over pay again in October?

Why’s it so complicated?

But should we really have to go to so much hassle? A colleague of mine at Which? was also in credit a few months back and the energy company simply paid back the amount without him even having to pick up the phone.

I accept that when paying by monthly direct debit, there needs to be a certain amount of flexibility – since you’re likely to be in credit after the warm summer months and in debit after a cold winter. These payments should balance out in the end. And I also accept that it’s our responsibility to make sure our meter readings are correct, by informing our energy provider every three months.

But it looks like energy companies have far too much leeway to arbitrarily decide what their policy is when our accounts are in credit. For instance, British Gas automatically refunds you when your £200 in credit, compared to E.ON which does so when you’re only in £5 credit.

At the end of the day, most of these companies will simply return the money if you ask for it. But should we have to when it’s our money they’re holding on to? After all, what would you prefer; money in your bank account earning you interest, or in your energy companies’ coffers?

John Symons says:
30 June 2011

If estimated bills work properly, in a country like ours needing no air conditioning the account should be in credit during the summer half year and in debit during the winter half year. It is not reasonable to expect only to run debit balances. What is needed is an automatic adjustment to the monthly payment if it is clear that the peak credit will be larger than the last peak debit, plus half a year’s worth of price changes, and vice versa. Dual fuel gas and electricity direct debit amounts should be handled quite independently.

Barri says:
30 June 2011

My mother who is 90 this year, wants low outgoings, and further to my advice, she gives her Electricity Supplier ALL, her senior citizens heating benefit, to ensure an affordable monthly Direct Debit each month. This has worked well over several years. However further to the supplier outsourcing Customer Services to India, they have returned to her the benefit she gave them as a down-payment, suggesting that due to their Year End accounting, they were unable to cope with the transaction, that would result in lower Direct Debits payments each month. Cash flow ? Dumb and dumber ?
Outsourcing efficiency ? Derrrrrrrrrrh !

My supplier has tried 3 times in the last 18 months to raise my monthly direct debit by as much as 48% in one instance. When I pointed out to them that I was in credit over and above any debit that I am likely to incur during the winter months (I do track this) and further more the uplift in electricity and gas had been 8% and 111% respectively I refused to pay the uplift. In the first two attempts they tried we came to a reasonable compromise with the rising prices that equated to less than a 20% uplift. On the last occasion they agreed with me and it was not uplifted at all in the end after I threatened to take my custom elsewhere. We should not just agree to them uplifting monthly charges without working things out. Especially when it is your money not theirs. If you think that you are being overcharged fight it and threaten to go elsewhere if they will not sort it out. As it so happens a few weeks after this last attempt they have now massively raised their prices anyway so it looks like I will be looking around for an alternative tarrif very soon before all the others jump on the bandwagon.

Gerhard Herrmann says:
1 July 2011

I have worked as a cosultant power economist for the World Bank and UN and have tried for several years without success to point out to OFGEM that their regulation of electricity distributors and suppliers is not only inadequate, but virtually non-existent. I am told that they do not regulate the tariff types used or that increases in prices are normal business decisions. They tell me that tens of millions of consumers have saved money by switching suppliers, when this process has actually resulted in an increase of at least £20 per annum, probably more, for every electricity and gas consumer in the UK. This wasteful expenditure could be avoided by proper regulation and has really benefitted only the many switching companies. And no one has criticised the Chairman of British Gas for claiming that electricity and gas prices must increase to allow the companies that provide public services to build new and larger facilities. It is the companies that should provide the finance for expansion. Their tariffs already provide for the replacement of existing assets by allowing tax free depreciation allowances to be deducted from their income.
Public services that require a separate connection to every consumer can be provided at least cost by a monopoly. When that monopoly is not owned by the people it serves, and perhaps even then, a regulator is required to ensure that it does not maximise its profits to the disadvantage of its consumers.

Ian says:
2 July 2011

I have just given my meter readings on line and the bill showed me in CREDIT by £97. The bill then informed me that they have looked at my Direct Debit and will be putting it up by almost £10 a month starting in July. The brass neck nerve of these companies knows no bounds. They are gready, and arogant, they donot care one bit for customer relations, just themselves and our money. GREAD, GREAD, GREAD.

John Smith says:
2 July 2011

I used to work in one of the “Big Six” energy suppliers and I was constantly speaking to customers who are angry that the company was “keeping their money”. I understood their point of view, I mean who doesn’t want their money in their own pockets? But then again I was having the same customers calling me in winter angry that they were infact now in debit.
The energy companies don’t earn any interest on YOUR money, so there’s no greed factor, but the last thing they wanted (when i worked there) was customers who couldn’t afford their winter bills.
I would say £100 credit is plenty, but anything over should be refunded. People need their money, but they also need some safety with their bills. Back-up is a good thing!

All energy companies hold our credit money.You know why ?
It is simple answer that consumer protection law is too weak . They all play their monopoly game to beat the Govt consumer protection agency,
My question is that what our MP and PM doing about it ?
We all have experienced that Phone and T.V companies also keep our advance money. We all pay our bill regularly so what is the reason to take advance money?
We must congratulate the WHICH Magazine team, WHO recently fought for credit card charges. They are the only taking active part for consumer interest.. WELL DONE TO WHICH TEAM !

Thanks, shire of rose! Although our campaigners have been working away at the surcharges issue, we couldn’t have done it without the support of so many consumers. I think when so many people stand up and say “this is wrong!” it suddenly becomes very difficult for people not to listen =)

On that note, you might like to know that we’re focusing a lot more on energy now. Energy is the number one financial concern for consumers, with rising prices and confusing tariffs, lots of people are getting fed up. You can see more about our energy campaigns here: http://www.which.co.uk/campaigns/energy-and-environment/

We changed our energy supplier earlier this year purely because of these policies. Scottish Power had indeed automatically refunded us almost £1200 – the overpayment built up over 12 months from our Direct debit.

All well and good, I suppose, at least it WAS repaid.

However, when I contacted them to request a reduction in the Direct debit, I was informed this wasn’t possible. Scottish Power still insisted we had to continue to overpay!

Phil says:
4 July 2011

You can be sure that money wasn’t lying idle in a bank account. Demand the lost interest as well.

Louise says:
6 July 2011

We changed to First Utility a few months ago using Switch with Which. Now we give online readings just before the end of the month and are billed for what we have used. We pay by variable direct debit so we are never over or under paid.

OVO energy pay you 3% interest on money in credit (paid monthly by deducting from your bill) so why not consider switching. They are very upfront – best energy company I have been with so far. At least check them out!

Hmmm… I challenged OVO part way through the year as I considered myself to be over £300 in credit. A young man tried to tell me that the ‘credit’ was actually the amount I had paid in and insisted that it was NOT the difference between what I had used and what I had paid.
Unconvinced, I checked it out at the anniversary of my contract and low and behold! Over £800 in credit. Yes £800! (Because it was over £600 I had to photograph the meters to prove it.)
Varied information was given to me by three different people when I asked for actual usage to use as a comparison: £80 a month usage, £157 and then in the end… £130. I have had to ask 3 times for a refund… and no-one has mentioned interest to me at all.
If I have built up £800 credit (by paying £162 a mointh) I believe the first figure is probably most likely to be right and I will be in credit again this year.

Hume says:
6 July 2011

Not all suppliers rip you off. Mine, Ovo Energy, pays 3% on all positive account balances. Other positves are that the tariff and service levels are good.

Sybilmari says:
6 July 2011

OVO have been an excellent supplier for me. They automatically pay me 3% on my credit balance which is good business sense. I pay less now for gas and electricity than just prior to when I joined them soon after they arrived on the market. The tariffs are straightforward. They are not run for big profits. Also, very importantly, they sponsor the protection of rainforests and their inhabitants. See http://www.ovoenergy.com and the links to ‘cool earth’. I don’t have to worry about my energy suppliers any more – intelligent, responsible and caring people at OVO do the thinking and planning for me. :O)

Keith Hooker says:
6 July 2011

Ovo are not perfect though. When my 12 month contract was up they sent me an email giving incorrect prices for renewal. They then failed to correctly implement a change of bank for direct debit. I lost confidence and changed supplier. Also, Ovo do not automatically refund any credit balance on closure of the account. You have to ask for it!

John says:
6 July 2011

I find it infuriating that if you pay by monthly direct debit you are always in credit. As with most people, I would expect to use less energy during the summer and therefore be in credit during the summer and debit during the winter months to avoid overpayments.

However, if you look at this from the supplier point of view, if all of your customers were in debt during the winter months this would be really expensive for them as you would have to bank roll them, costing the company money due to them having to get a loan to buy in the energy that their customers are using.
As a side issue, it would also mean that if any of your customers moved during the winter months – or even worse early spring when their debt would be at its greatest- then you would have to send them a large final demand to get your money back. This might lead to many people not paying their final bill – I’m thinking people who move house, not supplier.
It therefore makes business sense to keep your customers in credit all year round and give them their overpayment money back in a lump sum. This is bad for customers and we should get something back from this overpayment – such as interest on our credit balance.
Replacing meters with smart meters has no effect on this as I suspect most customers (myself included) like to pay the same amount every month rather than paying for what you actually use each month. I get paid the same amount every month and use a lot more energy during the winter months, so would like my payments spread out over the year.
I suspect someone will correct me if my comments are wrong….

My energy bill is up to date every month. I email a meter reading for the 31st/30th/28th of each month and the bill comes up in the middle of the month. What’s more if it’s in credit I get interest on the credit. Have a look at OVO. And you may tell me I am deluding myself, but it seems cheaper to me as well.

Yes OVO may not be the cheapest but they are customer friendly. We were £353 in debt in April. In June we were still £239 in debt and they requested an increase in our monthly DD.
Our fixed rate contract did not run out until November, but we were worried that when we came to renew the unit prices would be even higher. So they agreed to cancel the existing contract waived the £30 cancellation charge and put us on a new fixed rate contract for another year.
Plus when you are in credit you get 3% interest. That is better than you can get with most savings accounts!!

madhouse6 says:
21 September 2011

Hi, We found out last night that we are in credit by 1,300 pound with EDF duel fuel, we paid 240 a month, phoned them to reduce our bill cause we are skint, didnt even hesitate to reduce them by 50 pound, then after we set the account up online, thats when we found out how much credit we are in. My husband will be ringing them today for a very large refund. Fingers crossed, otherwise there not getting any monthly payments for a while!

Having got so fed up with their behaviour over the last year we recently switched from a certain Scottish power company to Coop Energy. We were notionally on a “dual-fuel” tariff, and what a duel it was to get the final accounts settled as there was a credit on gas and a debit on electricity [should not have been possible if their forecasting and monitoring worked correctly]. They were dealt with separately and massive cancellation charges [totalling £50+] were spread over both a/c’s. These charges were applied after the “final” statement [showing a nett credit] had been received. I revoked the DD authority on the understanding that a balancing credit refund would be sent to me but, as soon as it tried to capture the cancellation charges from my bank its application was rejected so my account was reverted to the standard tariff and the end result was a demand for immediate payment. The second “final” statement even had an entry shown as “Nett clean Up”. Lesson: Study – and calculate the implications of – the small print extremely carefully before signing up to any of these fancy On-line Dual Fuel Direct Debit tariffs. These are seriously sharp juice merchants.
I don’t care if Coop Energy works out more expensively – I like their honest, open and straightforward way of doing business.

Grey Area says:
23 October 2011

Soooo, e.on automatically refund credit at £5 do they? So why am I currently in credit with them to the tune of nearly £400, AND they have asked to increase my direct debit by a further £34?

It makes me laugh that one poster said “They don’t make money on our money”. Really? You honestly think they have a big pile of five pound notes somewhere that they are not bothering to invest? It also makes me laugh that another poster said it is not reasonable to only work with negative balances. Er, hello? The whole of the business world works on credit terms, (i.e. you get your goods and then have so many days to pay). I bet energy suppliers’ CORPORATE accounts are never in credit.

Miranda wrote: Gas automatically refunds you when your £200 in credit, compared to E.ON which does so when you’re only in £5 credit.

I have just checked my e.on account and I am £101.98 in credit. Very rarely am I in debit, since the company decides that my Direct Debit payment should rise before this happened. On one occasion I was told that my DD payment would have to be increased despite a large credit balance, but this change was cancelled as a result of a phone call.

I have looked at how this works, and the refund of credit only applies if this is present at the time of annual review. See:

If you have a large credit balance at other times you will have to ask for a refund.

Annoyed From Cornwal says:
30 October 2011

I am consistantly in credit with my electricity bills, our home is all electric and last year we had only a small amount to pay after our heaviest quarter. The electricity doubled my direct debit this year and despite repeated requests to reduce my direct debit or refund my credit, even though my consumption is down on last year, it has all fallen on deaf ears. On discussing this with friends I have found that just between 5 of us the companies are holding over 500.00 in credits. (different suppliers I may add) This reeks of unlawful trading! Most trading companies would not be able to run with this attitude!

Phil says:
30 October 2011

If that’s typical and if, say, ten million households pay by direct debit then the energy companies have £1 billion of OUR MONEY sitting in their bank accounts earning them interest. No wonder they’re so keen on DD and making sure their customers are in credit.

They shouldn’t just be obliged to pay the money back on demand but the interest too.

John says:
30 October 2011

so carrying your argument through and looking at from the other way. if we were all in debt by the same amount the energy companies would be in debt by 1 billion pounds. I won’t how much the interest on this would cost us extra on our accounts?

Phil says:
30 October 2011

Not necessarily, they may just have £1 billion less. Energy companies are not exactly poor, E.On alone made £1.15 billion from it’s UK operations in 2010

Companies will make refunds if asked to. I have read (and I don’t know if it is true) that energy suppliers prefer to keep customers in credit to avoid the need to ask for additional payments.

I am already paying by direct debit and would prefer to pay for what I use each quarter rather than a fixed amount each month.

John says:
30 October 2011

you would prefer to pay more in the winter than the summer? maybe I’m strange, but I earn the same in the winter and summer, so fixed direct debit works for me…
I’ve personally never had a problem getting a refund. that might not be true for everyone though….

I like to pay what I owe, as a matter of principle, so yes I would be happy to pay more in the winter. My problem seems to be that I use well below the average amounts of electricity and gas and tend to build up credit on my account. Where I have asked for refunds or direct debits not to be increased, this has been granted. This time round I have spent a great deal of time waiting to speak to someone because e.on has not had enough staff to cope with calls.