Why do energy companies always have my money...?

Victor_Delta

As I understand it, when you take out a new energy contract, the companies work out one's annual usage and then divide it by 12 for the monthly Direct Debit (with the first payment due in advance).

In which case, can anyone then explain to me why the companies I've used (and I've switched many times) always end up with a monthly balance in their favour - no matter when in the year I start with them.

Broadly speaking I would expect it to be in their favour for 6 months and mine for 6 months (except for the slight offset caused by the first advance payment). But it never seems to work this way...!

And don't get me started on how hard it is to get the credit balance back from them at the end of the year...

System

Victor_Delta wrote: »

As I understand it, when you take out a new energy contract, the companies work out one's annual usage and then divide it by 12 for the monthly Direct Debit (with the first payment due in advance).

In which case, can anyone then explain to me why the companies I've used (and I've switched many times) always end up with a monthly balance in their favour - no matter when in the year I start with them.

Broadly speaking I would expect it to be in their favour for 6 months and mine for 6 months (except for the slight offset caused by the first advance payment). But it never seems to work this way...!

And don't get me started on how hard it is to get the credit balance back from them at the end of the year...

The 'rules' have changed slightly in two respects - which some suppliers appear to be exploiting to their cash flow advantage. Firstly, suppliers have come under a lot of pressure from Ofgem to prevent consumers from accumulating a large amount of debt. Secondly, rather than review the DD payment at the mid-contract point with the aim of achieving a zero balance at the end of a contract term, some are using a rolling 12 month calculation: that is, 6 months left on present fixed tariff plus 6 months on SVT = much higher DD. Added to that, some suppliers are also asking for a month's payment at the start of the contract, so consumers will end up making 13 rather 12 payments before the Final Bill is raised.

AndyPK

If you have lots of money in the bank, pay for exactly what you use, by quarterly direct debit

[Deleted User]

Victor_Delta wrote: »

In which case, can anyone then explain to me why the companies I've used (and I've switched many times) always end up with a monthly balance in their favour - no matter when in the year I start with them.

Could that be a reason?

matelodave

You obviously aren't managing your account properly. If you work out your annual energy profile (ie using more in the winter than in the summer) then you should be able to work out the optimum time to start a contract.

If you start one in November or December then you'll probably be in arrears for a good proportion of the year however if you start it in Apri/may then you'll be in credit up until around November.

However as said above, some suppliers (or their computers) take a dim view of you being in arrears and will try tweaking your DD to compensate if they see your account going into debit. Scottish Power & First Utility used to try it with me, but I'd just get them to revise it back downwards to the agrre amount. I've got nearly eight years of weekly meter readings so I know what my average consumption should be and can fairly accurately determine how much I'm in arrear or credit

Ilona

AndyPK wrote: »

If you have lots of money in the bank, pay for exactly what you use, by quarterly direct debit

This is what I do. Paying quarterly for what I have used after I have used it. They don't get my money in advance. I know, it's supposed to be cheaper on a DD, but is it? I am very good at monitoring my consumption. My supplier has no penalties for paying quarterly, everyone pays the same.

Ilona

System

Ilona wrote: »

This is what I do. Paying quarterly for what I have used after I have used it. They don't get my money in advance. I know, it's supposed to be cheaper on a DD, but is it? I am very good at monitoring my consumption. My supplier has no penalties for paying quarterly, everyone pays the same.

Ilona

It is more often the case that the cheapest suppliers on the market require payment by DD with the first payment in advance of supply. Some suppliers, like Iresa, will not allow the account to go into debt. Don!!!8217;t associate paying in advance or by DD with poor billing and poor customer service. There are many good small, market leading on price, suppliers out there.

That said, each to their own.

AndyPK

Yes this highlights at least 3 methods of payment!

Iresa, who want money a month in advance (I recall people moaning about this on here!)
The most common, monthly DD
And quarterly DD where is it impossible for the supplier to be in credit (but you get a big bill after winter)

molerat

After I put my monthly readings in tomorrow Iresa will have £1.68 of my money and I will have £26.37 of EDF's so no problems here

At least if you are in credit with Iresa they will be paying you more than the bank does.

Norman_Castle

If I understand it correctly dd payments are requested every month by the supplier and not automatically sent. How difficult would it be to cap the amount held by them, 3 x monthly payments? Above this any debt is taken from the money held by them instead of taking further payments.

Part of the reason I left EDF was to avoid calling them every year to get my dd payments reduced. They would get me to overpay then reduce the payments the following year while they dribbled my money back to me. If I can accurately work out my monthly dd why can't they?

Victor_Delta

Good idea. But the suppliers would say this would break the system as 12 x the fixed monthly amount should come to the same as your expected annual charge. Dropping a payment - even if justified - would theoretically leave them short!