Ofgem clarifies issue with Ovo’s 3% interest on bill overpayment — Updated
Regulator: We already have rules to ensure direct debits are set at the right level
This is Money reported this week that Ofgem ordered independent gas and electricity supplier Ovo Energy to cease its 3% interest programme.
Ofgem released a statement today to clear up the confusion over the issue.
The discount, which has been offered by Ovo since 2010, offers customers 3% interest on overpayments that is then given back as credit toward their gas and electricity bills.
Recent uSwitch research showed that these overpayments could be a substantial figure. More than 13 million homes in the UK are currently in credit to their energy supplier, for a grand total of more than £1.2 billion.
And while Ofgem only recently passed rules requiring suppliers give back this excess upon request, several big six providers have reportedly been slow to do so.
Ofgem: The last thing we want to do is stop deals which truly benefit customers
Ofgem states that the interest payment goes against new reforms that went into effect earlier this year.
In an effort to make gas and electricity bills less complicated and easier to understand, Ofgem reduced the number of discounts suppliers could apply to their plans.
There are two allowable discounts: one discount for dual fuel plans and one for paying by direct debit.
In an effort to clarify exactly what the issue is with Ovo’s programme, Ofgem released this statement today:
“Ofgem wants to see customers’ money in their pockets rather than languishing as surpluses in energy suppliers’s bank accounts. We already have detailed rules to make sure that suppliers set direct debits at the right level and surpluses are refunded.
“The last thing we want to do is stop deals which truly benefit consumers. We are not banning Ovo’s offer of a 3% interest on balances. Our reforms to deliver a simpler, clearer and fairer market are flexible and allow deals such as Ovo’s where they are in consumers’ interests. We are currently working with Ovo on this issue to ensure that this offer stays within our framework to protect consumers, and in the meantime we have no intention of stopping Ovo from continuing to pay interest on balances.”
Ovo and Ofgem working together to agree a middle ground
An Ovo statement released at the same time also helped clear up for customers that they’re 3% discount wasn’t going anywhere just yet:
“Our OVO 3% Interest Reward is a central part of our offer and something our customers tell us is really important to them. OFGEM shares our ambitions to make the energy market a fairer, more open, more honest place and on this occasion we’re happy to be working with them to try and help make that happen.”