Ofgem lays out plans for energy suppliers to automatically refund surplus credit

What is Ofgem proposing?

A Game changer?

Millions of energy customers pay their energy bills via direct debit with the sum to be collected often set by the supplier. The amount to be collected is based on the predictions of how much gas and electricity a household will use and is often based on previous records.

Meter readings too play their part, but if the consumer is not using a smart meter there is a risk that they could send erroneous readings and in turn, be hit by a higher energy bill then they should be. Erroneous meter readings and incorrect energy bills are one of the biggest headaches faced by energy suppliers and consumers alike.

Often the balance will go into credit during the warmer summer months when lighting and heating is not needed as much and go into debit during the winter when demand is higher.

Suppliers should set the payments so that customers’ credit balance returns to £0 each year on the anniversary of when they started the payments. 

Despite this meter readings can show that direct debits have been set too high resulting in the customer consistently overpaying.

Under the current rules, it is up to the customer to chase up any money they are owed but this can take months and on rare occasions even years.

The new proposals by Ofgem will change all that and put the onus directly onto the energy suppliers.

Some energy suppliers already automatically refund credit balances but the Ofgem proposals will mean that all suppliers will have to do so.

Also read: Energy Billing – How does it work?

Why the need for such a proposal?

The issue of consumers overpaying energy suppliers and then struggling to get back the money they’re owed has been a thorn in the energy supply industry for years with the Energy Ombudsman receiving 1,000 complaints about credit balances in 2020 alone.

Some energy suppliers have been accused by trading standards and consumer groups of using the money they owe to consumers for unsustainable business practices.

As well as that, energy suppliers should also consider the damage, not refunding customers does to their reputation and the sector as a whole. A customer should not have to pester a supplier for sometimes months or even years to get what they’re owed.

“These new proposals would ensure that suppliers are not holding onto more of customers’ money than absolutely necessary, potentially returning millions of pounds of customers’ money. This is an important step in making the retail energy market fairer for consumers at a time when many are facing financial hardship. Households which pay for their energy bills through a fixed direct debit can find that they overpay during the summer – when less energy is used – and build up hefty credit balances which shrink again in the winter,” said Jonathan Brearly, chief executive at Ofgem.

Also read: Majority of Energy Suppliers failing to refund credit to customers within 10 days

What’s to prevent suppliers from hiking direct debits?

Ofgem has stated that a threshold for such payments will be put in place to ensure energy suppliers do not increase direct debits throughout a year. How this will be enforced will be discussed during the consultation.

If the regulator’s proposals are confirmed the rules would require suppliers to refund credit balances each year from 2022.

Also read: How can Energy Suppliers reduce Energy Billing Errors?

How can Dyball help energy suppliers with this?

Using our CRM system for energy suppliers, you can define trigger points within the system and automate customer correspondence by letter, email, or SMS.

This means that you can integrate telephone and email solutions for seamless back-office work and provide a greater customer experience. It also allows you to have greater control and will ensure that customers with owed credit payments will be paid within an acceptable timeframe.

Our CRM system enables energy suppliers to produce both gas and electricity billing through one platform. It also provides more accuracy and greater efficiency for your energy billing processes.

Also read: How a CRM makes Energy Billing easy for Energy Suppliers

Looking to enter the UK energy market? Dyball Associates team of energy market consultants can guide you through the steps to get qualified and attain your gas or electricity licence.

Whether you’re looking for electricity and gas systems or support on starting an energy supply company, Dyball Associates can help. 

Further Reading

Why are Challenger Energy Suppliers growing in popularity and how can they stay competitive?

23.6 million Smart meters now installed across the UK – Discover how Dyball’s DCC Adapter can help your energy supply business

New Government rules on white goods could save £75 on average Energy Bills

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