Consumer Credit Balances versus Better Ofgem Regulation

[Deleted User]

This is what Ofgem said in November 2022:

This is what is being reported today:

https://www.credit-connect.co.uk/news/energy-suppliers-hold-6-7bn-credit-belonging-to-16m-households/

‘ Credit balances are £5.3 billion higher than last year against the background of a mild winter and household efforts to reduce energy use. Households also benefited from the £400 in Government energy support between September and March.

The number of households in credit has risen by five million, up from 11 million households this time last year, with more than eight million bill-payers now in credit over £200.’

Yet another example of Ofgem being slow to realise what is going on. Why is it not insisting on refunds when credit is above a certain level?  I suspect Ofgem thinks it might push more suppliers over the edge.

MWT

Reading the details in the linked article, there is also a reduction in the number of households in debt in debt by 2 million.

... and given the number of suppliers that only produce a bill every 3 or 6 months, we should be expecting to see a considerable number in credit, and by over £200.

For very low users, the £400 support along with other social support payments will also have played a part in increasing those numbers.

I'm not sure these stats show that anything is 'going on', but I would like to see the practice of billing at intervals greater than one month eliminated so it can be more clearly seen where a customer balance is building up unnecessarily vs those where a large bill is going to arrive in a few months so the large balance is very much needed... 

born_again

Certainly billing to one month for everybody. 

But in terms of DD. There has to be a personal responsibility to realise that at least a 3 X summer months bill, as a credit balance come October is really a must to cover winter usage. Unless you are only being billed for what you use each month.

So Ofgem really should be setting a limit like that to ensure that people have enough credit to cover the higher usage months. Rather than setting a limit above which you have to be refunded.

Add in that there has to be a official meter reading at least once a year, even when smart meter is installed.

[Deleted User]

born_again said:

Certainly billing to one month for everybody. 

But in terms of DD. There has to be a personal responsibility to realise that at least a 3 X summer months bill, as a credit balance come October is really a must to cover winter usage. Unless you are only being billed for what you use each month.

So Ofgem really should be setting a limit like that to ensure that people have enough credit to cover the higher usage months. Rather than setting a limit above which you have to be refunded.

Add in that there has to be an official meter reading at least once a year, even when smart meter is installed.

A smart meter reading is an ‘official’ reading. A few years ago the meter reading requirement was once every two years (BG had a derogation which was a meter reading once every 5 years). The latest Licence obligation is to ‘obtain’ a meter reading once every 12 months.

born_again

OK, lets call it a safety check instead then 👍

[Deleted User]

born_again said:

OK, lets call it a safety check instead then 👍

Ofgem has said that it is up to suppliers to determine how often meter safety checks are required as they carry the Health and Safety responsibility.

Chrysalis

[Deleted User] said:

This is what Ofgem said in November 2022:

This is what is being reported today:

https://www.credit-connect.co.uk/news/energy-suppliers-hold-6-7bn-credit-belonging-to-16m-households/

‘ Credit balances are £5.3 billion higher than last year against the background of a mild winter and household efforts to reduce energy use. Households also benefited from the £400 in Government energy support between September and March.

The number of households in credit has risen by five million, up from 11 million households this time last year, with more than eight million bill-payers now in credit over £200.’

Yet another example of Ofgem being slow to realise what is going on. Why is it not insisting on refunds when credit is above a certain level?  I suspect Ofgem thinks it might push more suppliers over the edge.

They are frit of more suppliers leaving the market so are tip toeing around them in my opinion, its clear they had negative feedback on the idea so backtracked, Octopus was one supplier who made their negative feedback public.  Whilst Centrica supported the ring fencing.

---

Feels even more wrong when you see they combined allowing it to be used for cashflow whilst ringfencing consumer debt via increased SC charges.

MattMattMattUK

Chrysalis said:

[Deleted User] said:

This is what Ofgem said in November 2022:

This is what is being reported today:

https://www.credit-connect.co.uk/news/energy-suppliers-hold-6-7bn-credit-belonging-to-16m-households/

‘ Credit balances are £5.3 billion higher than last year against the background of a mild winter and household efforts to reduce energy use. Households also benefited from the £400 in Government energy support between September and March.

The number of households in credit has risen by five million, up from 11 million households this time last year, with more than eight million bill-payers now in credit over £200.’

Yet another example of Ofgem being slow to realise what is going on. Why is it not insisting on refunds when credit is above a certain level?  I suspect Ofgem thinks it might push more suppliers over the edge.

They are frit of more suppliers leaving the market so are tip toeing around them in my opinion, its clear they had negative feedback on the idea so backtracked, Octopus was one supplier who made their negative feedback public.  Whilst Centrica supported the ring fencing.

---

Feels even more wrong when you see they combined allowing it to be used for cashflow whilst ringfencing consumer debt via increased SC charges.

Centrica supported ringfencing because they are the wealthiest supplier, with a very low cost of credit, British Gas Retail could effectively borrow from Centrica for free, or use it for profit transfer, no other supplier has such low cost of borrowing the capital required for cashflow. Centrica supported it because it would have benefitted them by negatively impacting their competitors. Capital and finance has a cost, if we ringfence a chunk of money and deny companies the ability to use that as cashflow then costs will rise.

The reason that debts are protected using the Standing Charge is because Ofgem does not allow them to cut people off or take effective recovery action for bad debts. If the regulator is going to stop effectively prohibit them stopping customers running up additional debts and for taking effective recovery action against debts already accrued then there has to be an alternative form of funding to cover those debts. There are two sides on the scales, effective debt recovery and debts being paid by other consumers, we can have one, or a balance between the two, we cannot have both.

Are you prepared to have your bills increase 2-3% to cover the cost of finance if credits are ringfenced? Are you prepared to pay more for your bills so other people can refuse to pay theirs? 

Chrysalis

MattMattMattUK said:

Chrysalis said:

[Deleted User] said:

This is what Ofgem said in November 2022:

This is what is being reported today:

https://www.credit-connect.co.uk/news/energy-suppliers-hold-6-7bn-credit-belonging-to-16m-households/

‘ Credit balances are £5.3 billion higher than last year against the background of a mild winter and household efforts to reduce energy use. Households also benefited from the £400 in Government energy support between September and March.

The number of households in credit has risen by five million, up from 11 million households this time last year, with more than eight million bill-payers now in credit over £200.’

Yet another example of Ofgem being slow to realise what is going on. Why is it not insisting on refunds when credit is above a certain level?  I suspect Ofgem thinks it might push more suppliers over the edge.

They are frit of more suppliers leaving the market so are tip toeing around them in my opinion, its clear they had negative feedback on the idea so backtracked, Octopus was one supplier who made their negative feedback public.  Whilst Centrica supported the ring fencing.

---

Feels even more wrong when you see they combined allowing it to be used for cashflow whilst ringfencing consumer debt via increased SC charges.

Centrica supported ringfencing because they are the wealthiest supplier, with a very low cost of credit, British Gas Retail could effectively borrow from Centrica for free, or use it for profit transfer, no other supplier has such low cost of borrowing the capital required for cashflow. Centrica supported it because it would have benefitted them by negatively impacting their competitors. Capital and finance has a cost, if we ringfence a chunk of money and deny companies the ability to use that as cashflow then costs will rise.

The reason that debts are protected using the Standing Charge is because Ofgem does not allow them to cut people off or take effective recovery action for bad debts. If the regulator is going to stop effectively prohibit them stopping customers running up additional debts and for taking effective recovery action against debts already accrued then there has to be an alternative form of funding to cover those debts. There are two sides on the scales, effective debt recovery and debts being paid by other consumers, we can have one, or a balance between the two, we cannot have both.

Are you prepared to have your bills increase 2-3% to cover the cost of finance if credits are ringfenced? Are you prepared to pay more for your bills so other people can refuse to pay theirs? 

I already posted what I think could be done.

But you seem to be approaching this from a perspective of entitlement, in that the suppliers think they are entitled to have unpaid debts covered either by the government or the rest of the customer base.  Whilst at the same time spending money that they hold that hasnt been billed for, the best of both worlds.

They should be running their ships in a way where we dont have so much money going to waste, what happened in October 2021 was an utter embarrassment and Ofgem should be ashamed of themselves.

A few of us on here have pointed how these problems have become self inflicted, the suppliers choose to let people rack up debts by allowing fixed direct debits, they apparently wait almost 2 years before taking action (according to someone on here, who didnt provide the source of info when I asked).

I remember the days when every customer paid in arrears by 3 months (and maybe even more if they waited for final reminder) and the companies managed fine.

As I mentioned before compare it to the banking sector, and other sectors where they dont have a regulator wrapping them in cotton wool.

So yep your question already answered by me, the problems will continue as I dont see any reasonable action taken by Ofgem or the industry to address them.

[Deleted User]

Chrysalis said:

MattMattMattUK said:

Chrysalis said:

[Deleted User] said:

This is what Ofgem said in November 2022:

This is what is being reported today:

https://www.credit-connect.co.uk/news/energy-suppliers-hold-6-7bn-credit-belonging-to-16m-households/

‘ Credit balances are £5.3 billion higher than last year against the background of a mild winter and household efforts to reduce energy use. Households also benefited from the £400 in Government energy support between September and March.

The number of households in credit has risen by five million, up from 11 million households this time last year, with more than eight million bill-payers now in credit over £200.’

Yet another example of Ofgem being slow to realise what is going on. Why is it not insisting on refunds when credit is above a certain level?  I suspect Ofgem thinks it might push more suppliers over the edge.

They are frit of more suppliers leaving the market so are tip toeing around them in my opinion, its clear they had negative feedback on the idea so backtracked, Octopus was one supplier who made their negative feedback public.  Whilst Centrica supported the ring fencing.

---

Feels even more wrong when you see they combined allowing it to be used for cashflow whilst ringfencing consumer debt via increased SC charges.

Centrica supported ringfencing because they are the wealthiest supplier, with a very low cost of credit, British Gas Retail could effectively borrow from Centrica for free, or use it for profit transfer, no other supplier has such low cost of borrowing the capital required for cashflow. Centrica supported it because it would have benefitted them by negatively impacting their competitors. Capital and finance has a cost, if we ringfence a chunk of money and deny companies the ability to use that as cashflow then costs will rise.

The reason that debts are protected using the Standing Charge is because Ofgem does not allow them to cut people off or take effective recovery action for bad debts. If the regulator is going to stop effectively prohibit them stopping customers running up additional debts and for taking effective recovery action against debts already accrued then there has to be an alternative form of funding to cover those debts. There are two sides on the scales, effective debt recovery and debts being paid by other consumers, we can have one, or a balance between the two, we cannot have both.

Are you prepared to have your bills increase 2-3% to cover the cost of finance if credits are ringfenced? Are you prepared to pay more for your bills so other people can refuse to pay theirs? 

I already posted what I think could be done.

But you seem to be approaching this from a perspective of entitlement, in that the suppliers think they are entitled to have unpaid debts covered either by the government or the rest of the customer base.  Whilst at the same time spending money that they hold that hasnt been billed for, the best of both worlds.

They should be running their ships in a way where we dont have so much money going to waste, what happened in October 2021 was an utter embarrassment and Ofgem should be ashamed of themselves.

A few of us on here have pointed how these problems have become self inflicted, the suppliers choose to let people rack up debts by allowing fixed direct debits, they apparently wait almost 2 years before taking action (according to someone on here, who didnt provide the source of info when I asked).

I remember the days when every customer paid in arrears by 3 months (and maybe even more if they waited for final reminder) and the companies managed fine.

As I mentioned before compare it to the banking sector, and other sectors where they dont have a regulator wrapping them in cotton wool.

So yep your question already answered by me, the problems will continue as I dont see any reasonable action taken by Ofgem or the industry to address them.

The big mistake was the Cap and Ofgem’s reluctance to raise it when wholesale prices started to rise exponentially 18 months ago. Setting Caps by looking in the rear-view mirror was always going to be a risky proposition. As a result, suppliers went over the cliff like Lemmings.

Similarly, the Government’s over reaction to pre-payment meters has allowed debt to accrue. If you want suppliers to act like Banks, then we have got to allow them to manage consumer debt pro-actively. Given that it suited the Government narrative to say that it was protecting customers from higher prices etc, it is not unreasonable for suppliers to expect to be compensated for any bad debt that they are required to accrue.

Chrysalis

If their poor management of debt is down to Ofgem, then yes I agree changes can be made, but at the same time, thats about preventing the debt getting large in the first place rather than forcing unaffordable replacement policies on to people.

I think a good message to send would be along the lines off "we will allow you to take action early, allow you to not allow debt to be built up, but at the same time we wont hold your hand in recovering that debt, you fall based on your own decisions".

The banking sector is my example again, credit files, checks, credit limits and so forth, all measures to try and prevent the worst.