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

the_lunatic_is_in_my_head

QrizB said:

the_lunatic_is_in_my_head said:

Big companies are renowned for having favourable terms with suppliers, are the supply companies actually putting the cash down, do they have credit or any pay on consignment type of agreement? 

No.

If you want to offer eg. a 12-month fixed-rate tariff, a prudent supplier will buy the energy for the next 12 months in advance on the markets. So they (for example) will pay 119p/therm today for gas that won't be delivered until Octoer 2024.

An imprudent supplier might choose to buy their gas on the month-ahead market instead, but (as we saw last autumn) will go bust if the market rises ...

Fully understand  

Question was regardless of how they buy, how is it known they don't have credit, pay on consignment or spread over payments? 

Equally if they do have to pay up front and thus require large capital doesn't that create a significant barrier to entry reducing competition in the supplying to consumers market? 

Sea_Shell

In my experience, Eon are very good at refunding credit.   I've done it a few times after overpaying (on purpose).

Just this week...

Email exchange with Eon.

Received one saying "your DD of £91* is too low, so we're increasing it to £100." Annual estimated cost £1300.

Ok, but, they haven't taken into account my current true credit of £230. After bill on 1st October, on current readings, but not including my October DD payment.

So I emailed them separately to request my £230 back, and I've had a "yes, no problem, we'll credit within 10 days" reply, by return .😁

So as we head into winter, it'll be interesting to see how far into debit they'll let my account go, before wanting to increase the DD again?

* I'd reduced it down manually last month to the lowest it would allow 😉

Scot_39

Don't be surprised if that £100 then becomes 1300/12 = £108 at the same time.

They had factored credit into my revised much lower than annual/12 DD in both Apr - lower rates and annual anniversary  and July lower rates - but not for Oct lower rates - so used ybe auto facility to request refund.

They set a min credit of over £100 - only offering the excess back - not the full true credit balance.

And put my DD up.

markin

If they have to loan money the costs are added to the operating cost before the profit cap, so the customer will always pay.

wild666

Around 40 years ago the vast majority of people paid their energy bills on demand every three months, now though these suppliers can hold on to peoples credit which in my case in 2019 was £900. I'm now with Octopus and my credit is £320 and my monthly DD is £57, I lowered it last month from £69 because my monthly usage was under £50 but it will increase this winter so my credit will be eaten into.
I still expect a few hundred left in credit by the end of winter as the £57 will only mean my monthly bill will be around £69 this winter.

matelodave

I wonder what the equivalent amount is for those who are in arrears and the energy firms are funding them until they pay. Just a thought.

I dont have a big problem with the DD concept especially as it allows me to budget. I do my sums and my DD is set so that my account balances out at the end of a 12 month period, For some of the year I'm in credit and sometimes I owe them some.

dunstonh

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.

I wonder if it was really £1100 credit or a supplier (pre-Kraken EDF) where they add the monthly payments to the account but dont deduct the use until they generated a bill.  Therefore giving a false credit position.

EDF showed we had a £1300 credit prior to Kraken and bill generation but it was false.   It was a much more expected figure of around £470.

badmemory

I thought the standing charges were suppose to cover the costs of the failures of suppliers.  But as my mother used to say you know what thought did.  I'm sure that was the explanation of the original increases though.

QrizB

badmemory said:

I thought the standing charges were suppose to cover the costs of the failures of suppliers.  But as my mother used to say you know what thought did.  I'm sure that was the explanation of the original increases though.

Yes, there's a part of the standing charge - currently £18+VAT, so about £19 a year - to pay the SoLR costs. Those should cease some time next year. There's a full breakdown of the Ofgem cap components here.

All the other parts of the standing chage pay for other things.

I'm not entirely sure what your question was, but hopefully that's the answer!

molerat

Yes, there's a part of the standing charge - currently £18+VAT, so about £19 a year - to pay the SoLR costs. Those should cease some time next year.

But CI's predictions include an 8p increase in electric SC from April.