According to The Telegraph, more than 50% of all households in the UK pay for their energy by direct debit. The process is often cheaper than other methods of payment but can lead to inaccurate billing and customers finding themselves in credit.
Under current Ofgem rules, suppliers have to review direct debit payments twice a year and refund credit only when explicitly asked to do so by customers. But that’s about to change.
Direct debit payments do not always match consumption
Typically, when someone pays via monthly direct debit, an energy supplier will have estimated annual energy use and divided the price by 12.
As a result the payments do not always match monthly consumption. In winter, for example, consumers use more energy than in summer. The idea is that over the course of the year these payment s will balance out, however, many customers have found themselves in credit and energy companies have been criticized for not paying back this surplus automatically.
What has changed?
Under the new agreement, British Gas, EDF, First Utility and SSE will all follow in E.ON’s footsteps and automatically refund customers in credit by more than £5 (£10 for First Utility) following an annual review. Customers will no longer have to submit a request to their supplier for this refund.
Greg Barker, minister for energy and climate change, praised the company’s initiatives: “This is important and welcome news for the 55% of energy customers who chose to pay by direct debit.”
“There is still more to do but this builds on the coalition reforms to the energy market […] I hope other energy companies will adopt this approach very soon.”
npower and Scottish not to implement changes
npower and ScottishPower, the only two members of the big six who will not automatically refund customers, both defended their position.
A spokesperson for npower said: “We’ve had feedback that refunding very low amounts isn’t worthwhile and we also know many people like to keep their account in credit.”
ScottishPower commented: “We believe that our policy offers choice for customers. If a customer is in more than one month’s credit, or more than £75 in credit, the full credit balance on their account will be automatically refunded.
“Where customers are less than one month in credit, or less than the £75 credit threshold, they will be informed in a clear and prominent way that they can have a full refund of the credit. Otherwise the credit will be rolled forward to reduce future payments.”