Is 8.1 Billion too much for energy firms to hold of customer money?

MultiFuelBurner

BBC News - Energy firms holding £8.1bn of customers' money

https://www.bbc.co.uk/news/business-66992865

What figure should this be if not 8.1billion?

28 million customers.

When on direct debit we used to like to go into winter with £300-500 in credit but we are now on whole month variable direct debit but I suspect that is a little know way to pay for many not on these boards.

QrizB

£8.1bn is just under £300 each for 28m customers, about 15% of the EPG cap.

The article says the number was "between January and March", when you'd expect credit balances to be at their lowest. However that's also towards the end of the EBSS which inflated some customers' credit balances.

I run a credit balance of that sort of size with Octopus. (I'm paying a fixed DD). I request refunds quarterly, and they turn up within the 10 days they quote.

Chrysalis

Two potential discussions here, one is on the fixed DD system which relies on customers having credit built up for winter months, so inevitably at this time of the year there will be built up balances.  This doesnt work perfect, some get under charged and have a debit balance all year round, and some get overcharged and have a credit balance all year round, these latter customers are the ones who tend to end up with huge credit balances.

The other issue is should this money be in the supplier's control or with an intermediate entity.  As a much better form of protection against suppliers going bust.

I see Dolor mentioned in another thread, that perhaps this protection shouldnt even exist.  In which case let them keep the money in their own accounts, but consumers take a risk the money is safe.

Ofgem are currently taking an approach that leans on protecting the suppliers place in the market and as such are only applying minimal regulation in this area, as a consumer you can switch to a variable DD which means you never pay more or less than your bill, but most people are probably ignorant of this and some would prefer to stay on fixed DD anyway as its a solution for those who have budgeting issues.

the_lunatic_is_in_my_head

MultiFuelBurner said:

Is 8.1 Billion too much for energy firms to hold of customer money?

It is if they go bust and we have to pay for it.  

Credit balances should be completely ring fenced, suppliers have the benefit of less customers in debt and customers have the benefit of not having to budget as much as they would on a variable DD.  

Beyond that what else are the supply companies doing with all this money?

MultiFuelBurner

the_lunatic_is_in_my_head said:

MultiFuelBurner said:

Is 8.1 Billion too much for energy firms to hold of customer money?

It is if they go bust and we have to pay for it.  

Credit balances should be completely ring fenced, suppliers have the benefit of less customers in debt and customers have the benefit of not having to budget as much as they would on a variable DD.  

Beyond that what else are the supply companies doing with all this money?

Interest on 8.1billion at the moment is decent.

Should be over 8.1billion now as indicated fixed DD customers should go into winter win large credit balances.

I don't know if energy companies can earn interest on ring fenced money

rp1974

This is what happens when people don't bother keeping an eye on their bills,if your paying out more than a grand you didn't need to,without noticing,you probably should be taking a closer look at your priorities,imho.
Obviously those "evil" suppliers are at it,and 100% to blame,zero responsibility on the regulators or customers part of course.

It strongly suggests to me at least,that Ofgem could help here by making monthly variable DD the default payment method,which would prevent exactly the situation as presented here.*.

*For clarity,I'm not in the employ of any energy supplier,regulator and so on,just a standard adult that reads their meters and checks their bills.

dealyboy

It is paying in advance. How many of us pay in advance for things? I can only think of one, season tickets for travel, but then the effective unit travel price is discounted.

Maybe fixed DD payers should earn credit interest. Come on Suppliers up your game ... this is a free market.

the_lunatic_is_in_my_head

MultiFuelBurner said:

the_lunatic_is_in_my_head said:

MultiFuelBurner said:

Is 8.1 Billion too much for energy firms to hold of customer money?

It is if they go bust and we have to pay for it.  

Credit balances should be completely ring fenced, suppliers have the benefit of less customers in debt and customers have the benefit of not having to budget as much as they would on a variable DD.  

Beyond that what else are the supply companies doing with all this money?

Interest on 8.1billion at the moment is decent.

Should be over 8.1billion now as indicated fixed DD customers should go into winter win large credit balances.

I don't know if energy companies can earn interest on ring fenced money

I guess for the individual the interest on £300 isn't really much but for the big suppliers it adds up.

When Ofgem calculate the cap it's said profit is limited to 1.9%, are they considering aspects such as interest on credit balances?

If they are I guess we save a little bit now against a risk of paying for those go who bust later, if they aren't then it doesn't really benefit us with that regard. 

Xbigman

If you keep reading the article the 8.1bn includes business accounts too. It also states OFGEM is unable to say what the split between business and household balances is.

The best bit was the example of someone who 'unknowingly' built up £1100 of credit. So someone who doesn't bother to read their bills then.


Darren

Netexporter

How many of us pay in advance for things?

Petrol and diesel. You pay for it, then you use it. Food. You pay for it, then you eat it.

MattMattMattUK

dealyboy said:

It is paying in advance. How many of us pay in advance for things? I can only think of one, season tickets for travel, but then the effective unit travel price is discounted.

Insurance, one pays for a year in advance, travel, most subscription services are paid in advance, car tax, TV license, event tickets etc. 

The idea that everything should be paid for after the fact is why so many get into debt.