They’re hoarding my money

MattMattMattUK

[Deleted User] said:

Credit balances can get emotions running very high. If 2 years ago, someone posted that they had a credit balance then of a £100 no one would have batted an eyelid. Yet people get agitated about a £300 credit balance when energy prices have risen by a factor of 2.5. 

This is where things often go wrong. Finances requires a level headed, rational approach, people getting emotional is never a good idea when it comes to finance. We are also unfortunately still in a situation where many people refuse to understand their energy bills and get angry when reality does not match their incorrect viewpoint.

[Deleted User] said:

Monthly DD payments do offer some billing stability given than most energy is consumed over the Winter period: but it isn’t an exact science. A bit like shares, last year’s usage is no indicator of how much energy will be used in the next 12 months. Suppliers use algorithms to try to balance out seasonal weather differences when determining an annual cost.

I agree that there is a level of guessing involved, weather patterns, people cutting back on usage because of price rises and other variables, but for the vast majority of households, if they are staying in the same property, last year's usage is going to give a reasonable estimate for this year's and next year's usage. The issue is that many people have failed to understand the price rises, they say "I paid £100 a month for the last three years, they are trying to rob me charging £250 a month now", failing to understand the cost increases.

Dolor said:

Ofgem did consider forcing suppliers to hold all credit balances in escrow but changed its mind after it was pointed out this this would lead to higher borrowing, and increased costs for consumers. 

Yep, it was a badly thought out kneejerk reaction to the SoLR process, ring-fencing consumer credits would have pushed up energy costs, either stick with the current system or just stop protecting balances and consumers can take their chances just as they do with most other credit balances.

JSHarris

Dolor said:

Monthly DD payments do offer some billing stability given than most energy is consumed over the Winter period: but it isn’t an exact science. A bit like shares, last year’s usage is no indicator of how much energy will be used in the next 12 months. Suppliers use algorithms to try to balance out seasonal weather differences when determining an annual cost.

May be our usage isn't typical, but it does seem reasonably easy to use last year's pattern of  usage as a good indicator of this years usage (same goes for previous years).  If I can easily plot the mean usage ( the red dashed line) in order to get a fairly good idea as to what the DD needs to be set at, then suppliers should be able to do the same.  In the case of UW, they assumed our mean usage was around 770kWh/month, when in reality it's about 342kWh/month.  Hard to see how that sort of error could creep in accidentally:

markin

The £50 dd raise makes sense, they can't compel you to make the top up payment can they? So just ignore that request.

[Deleted User]

 they assumed our mean usage was around 770kWh/month, when in reality it's about 342kWh/month.

That’s a discussion that you need to have with UW. I am with Octopus and my annual gas estimate is pretty good. Electricity less so as I have PV solar and I get paid for exports.

Octopus also allows its customers to set a monthly DD payment via an App. My DD is currently set at £10 per month. Octopus seems to be content for me to set my DD payment as I like provided there is enough credit in the account to pay the next monthly bill in full. That said, I have been an Octopus customer for over 5 years and my energy account has never been in a debit balance.

JSHarris

Dolor said:

 they assumed our mean usage was around 770kWh/month, when in reality it's about 342kWh/month.

That’s a discussion that you need to have with UW.

I just dumped them last year and switched to EDF.  EDF seem to have set the DD at the right level.  We're slowly building up credit at the moment, but I think we're on track to get the account balance to zero by March next year.

dunstonh

May be our usage isn't typical, but it does seem reasonably easy to use last year's pattern of  usage as a good indicator of this years usage (same goes for previous years). 

It is worth remembering that the 2022/23 cold seasons were milder than normal.  Energy use linked to heating was about 20% lower than norm.

 If I can easily plot the mean usage ( the red dashed line) in order to get a fairly good idea as to what the DD needs to be set at, then suppliers should be able to do the same. 

They will typically use methodology based on more typical. seasonal temperatures.  However, they have a number of unknowns to deal with.   For example, they don't know your heating method.     It could be electric, it could be something else.   So, there are always going to be variables.

FreeBear

Scot_39 said: They might accept or argue along the lines of "but it was a mild winter" etc

Although it was a mild winter for most, early spring was noticeably cooler. As a result, many people had their heating on as late as May when in previous years, it might have been turned off in March.

Eon wanted to put my DD up to ~£120, but I pointed out my energy consumption was low, and likely to reduce even further with a new boiler. Didn't take much for them to agree to £100 per month.

JSHarris

dunstonh said:

May be our usage isn't typical, but it does seem reasonably easy to use last year's pattern of  usage as a good indicator of this years usage (same goes for previous years). 

It is worth remembering that the 2022/23 cold seasons were milder than normal.  Energy use linked to heating was about 20% lower than norm.

 If I can easily plot the mean usage ( the red dashed line) in order to get a fairly good idea as to what the DD needs to be set at, then suppliers should be able to do the same. 

They will typically use methodology based on more typical. seasonal temperatures.  However, they have a number of unknowns to deal with.   For example, they don't know your heating method.     It could be electric, it could be something else.   So, there are always going to be variables.

The issue here is the likely magnitude of any difference.  The numbers show the scale of the error and this cannot possibly be ascribed to a 10% or so variation from one season to another.  Easy to see from the January/February usage that seasonal variation is small.  Our 2022 Jan/Feb usage was 1,269kWh, our 2023 Jan/Feb usage was 1,141kWh.  A variation of just 10%.

For all of 2021 and the early part of 2022 our DD was set at £78/month.  By April 2022 our account was £600 in credit.  Despite being in credit at the end of the heating season, UW wanted to increase my DD to £158/month.  That would have put us further into credit through the winter of 2022/23.  I estimated my credit balance would have been well over £1,000 by April 2023 if they had done this (ignoring the government money as I didn't know was on it's way at that time).

I switched to EDF in 2022.  They set my DD at £68/month, which seems to be pretty accurate.  Hard to understand why UW felt I needed to pay more than double that a year earlier, when prices were a bit lower.

mmmmikey

...quite apart from the weather there have been other factors that have caused big changes in patterns of energy use:

1. A lot of people spent more time at home, either on furlough or working from home, during the pandemic. So difficult to estimate last winters use based on the previous two for a lot of customers

2. Prices rose dramatically to the point where people cut back a lot, so you can't really assume that next winter willbe the same as this winter - it depends what adjustments people made and why

If you throw in the fact that the cost/kWh over the next year has also been a bit of a guessing game it's hardly surprising that the estimates are often out and sometimes substantially.

My own view is that although paying a fixed amount monthly based on an annual estimate and then squaring up at the end of the year has worked well in the past, it's no longer a good system. Firstly, for the reasons above, it's difficult for an energy supplier to get estimates correct and a significant portion of the customer base hasn't been sufficiently engaged to estimate themselves. Secondly, the sums of money involved are now such that in my view it would be more appropriate for the whole budget account scheme to be regulated by the FSA rather than Ofgem.

I can't help feeling that smart prepayment meters are the way to go. Anyone who wants to top up the same amount monthly year round could do so, and the amount they are in credit is entirely up to them. There's no reason why the suppliers couldn't suggest an amount to pay monthly. Prepayment meters work as a solution for many of the most vulnerable customers already as putting more money in the meter is a concept that is easy to grasp.

CSI_Yorkshire

JSHarris said:

dunstonh said:

May be our usage isn't typical, but it does seem reasonably easy to use last year's pattern of  usage as a good indicator of this years usage (same goes for previous years). 

It is worth remembering that the 2022/23 cold seasons were milder than normal.  Energy use linked to heating was about 20% lower than norm.

 If I can easily plot the mean usage ( the red dashed line) in order to get a fairly good idea as to what the DD needs to be set at, then suppliers should be able to do the same. 

They will typically use methodology based on more typical. seasonal temperatures.  However, they have a number of unknowns to deal with.   For example, they don't know your heating method.     It could be electric, it could be something else.   So, there are always going to be variables.

The issue here is the likely magnitude of any difference.  The numbers show the scale of the error and this cannot possibly be ascribed to a 10% or so variation from one season to another. 

The most recent winter was mild.  Electricity demand peaked at about 27.7 TWh for the month of January.

January 2014, January 2015 and January 2017 all had demand of about 29.9TWh.

That looks like a temperature dependency of +- 5% ish.

As you appear to be an electric heating household (feel free to correct me on that), then it could be reasonably expected that your variation between different winter temperature patterns would be greater than the overall 10% figure from the sector - possibly approaching the corresponding figures for gas.

The latest I can reliably find for gas is Q4 '22, about 7.5 million m3 domestic consumption.   For the three winters I looked at for electricity, the numbers were 9.1m, 8.5m and 9.5m - so variations around 20% or +-10% ish.

Overall, your variation appears less than expected, but not by a massive margin, which would agree with your assertion that larger change in DD was unwarranted, either using your own consumption figures or more general industry history.