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

Grumpy_chap

MultiFuelBurner said:

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

That is how things always worked.  Sometimes the old ways are the best.

However, my rather useless energy supplier has just credited me back with the full balance of my account as it has "accrued to a large credit balance". 
It was more than one and less than 2 months' DD.  Hardly excessive given we are moving into the winter where the bill will be higher. 
At the same time, the DD amount has been dropped by a third.

This will result in me coming out of the winter months with a big balance owing to the energy supplier.  I prefer it the old way.

Mobtr

Grumpy_chap said:

MultiFuelBurner said:

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

That is how things always worked.  Sometimes the old ways are the best.

However, my rather useless energy supplier has just credited me back with the full balance of my account as it has "accrued to a large credit balance". 
It was more than one and less than 2 months' DD.  Hardly excessive given we are moving into the winter where the bill will be higher. 
At the same time, the DD amount has been dropped by a third.

This will result in me coming out of the winter months with a big balance owing to the energy supplier.  I prefer it the old way.

Would that not balance out again in the Summer when you use less? 

Grumpy_chap

Mobtr said:

Grumpy_chap said:

MultiFuelBurner said:

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

That is how things always worked.  Sometimes the old ways are the best.

However, my rather useless energy supplier has just credited me back with the full balance of my account as it has "accrued to a large credit balance". 
It was more than one and less than 2 months' DD.  Hardly excessive given we are moving into the winter where the bill will be higher. 
At the same time, the DD amount has been dropped by a third.

This will result in me coming out of the winter months with a big balance owing to the energy supplier.  I prefer it the old way.

Would that not balance out again in the Summer when you use less? 

No.
The fixed DD always requires over paying in summer (so you enter the winter in credit) and underpaying in winter (so, hopefully, you come out neutral around Easter).  The build a credit balance until Autumn ready to start the cycle again.
The daft actions of the supplier mean I will start at zero balance entering the winter, accrue a debt and not make payments large enough to cover the bill over the course of the year.  It could be argued that the zero balance can be at any time of the year, but now that my DD will only be 2/3 of what it was, I will end up underpaying massively (I was only just over one-month's payment in credit anyway).

69bertie

ArbitraryRandom said:

You don't pay in advance for more than you will use over the 12 months if you pay attention to your average usage and check your DD lines up with your expected total. If you think your DD is too high then get it changed and if you are unhappy with your credit balance ask for it to be refunded - but expect to have to base your request on actual hard data, not that you 'think' it's too high.  

If only it was that simple. I have in the past month moved from Scottish Power to Octopus. I was quite happy with the tariff I was on (roughly the same as Octopus E7), so why the move?

The money that SP were holding on to. 

We'd had solar and battery installed back last March. Quite obviously, we were not going to be using as much electricity as we had been (we're oil fired, heating and hot water). I had already set the DD lower online and yet within a couple of weeks, I started to get emails suggesting that I should be paying more. From £75 to £110.

Cut a long story short, I had a chat session which resulted in the DD being set at £75 a month. Fine.

In case you wonder what happened in 2022, we were away for the month and the boy went off to Uni in September .

Meanwhile, I had already asked for the refund (as per what it says on SP own website) for the sum of £400 that the balance had built up to. You can see where we're going. I'm £400 in credit and they want to increase the DD. Even though our usage was around £45. Nothing happened. I then got another email suggesting I increase the DD to £110. It then decreased it to £95. I asked SP as to whether they did a variable DD. The answer was No.

I again asked for the £400 back. The email I got back was out of this world. It really was. Google Translate comes to mind. The end result was the direct debit would be reduced (again) and they would refund £300. A week later, I get another, your DD needs increasing email............

Enough. I swapped to Octopus. I think it took 5 days. The Smart meter is being read by Octopus. Octopus also do a variable DD. Which means I will be paying a bill based on the actual meter reading each month. Simples! We don't use much more in the winter as I wrote earlier, we are oil fired. No need for huge amounts lying around for the electricity companies to garner interest on.

And as an aside. They can't even send through the correct meter readings. Luckily, not only do I have bills showing the correct readings but photos as well. We'll get that sorted soon.

ArbitraryRandom

69bertie said:

ArbitraryRandom said:

You don't pay in advance for more than you will use over the 12 months if you pay attention to your average usage and check your DD lines up with your expected total. If you think your DD is too high then get it changed and if you are unhappy with your credit balance ask for it to be refunded - but expect to have to base your request on actual hard data, not that you 'think' it's too high.  

If only it was that simple. I have in the past month moved from Scottish Power to Octopus. I was quite happy with the tariff I was on (roughly the same as Octopus E7), so why the move?

I'd not ask - Scottish Power are one of the worst companies I've ever had dealings with when it comes to customer service and billing - I don't think even being on variable DD would result in fewer problems than regular DD with that lot! 

But in honesty I don't think your situation is all that comparable to what I was saying... you made a significant change to your household and usage habits over the three years, meaning the available data was of limited predictive use and issues with forecasting were almost inevitable. Most of us are very boring and predictable, meaning forecasting (for the householder and the supplier) is relatively easy. 

In your case, moving to a new supplier puts you on a clean slate, where they'll accept your estimate but review at 6 months and push an adjustment accordingly. The longer you're then with that supplier the more data they will have and the better their internal estimates.

As we move to more people having smart meters then that should improve even more - as there'll be more granular data to factor in changes to the home and that data should be available to your new supplier on a move, so they don't have to rely on building up their own history.   

markin

stu12345_2 said:

subjecttocontract said:

I'm a few hundred quid in credit, pretty much what would be expected this time of year. I don't see any problems with it. This is someone trying to find a problem that doesn't exist.

that few hundred quid could be in an interest bearing short term  cash account making you money.
in the same way the energy companies are enjoying your money.

Or more people having to put it on the CC or get payday loans because they spent it all on the kids over the summer, Its why most people like fixed DD's

Chrysalis

Scot_39 said:

the_lunatic_is_in_my_head said:

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. 

It's not a limit on final profits  - it's an allowance over and above nominal mutually agreed operating and variable in practice wholesale purchase costs.

And it's now 2.4% from Oct 1st afaik.

And it's on a financial accounting metric known as EBIT - earnings before interest and tax.

And despite the potential interest on that £8bn - many energy resellers are operating under high levels of  debt currently.

Due in large part to the Ofgem cap imposed as wholesale costs increased last year.

30 or so firms - large and small alike - so in debt - they collapsed.

And the interest on servicing that debt - does come out of the 1.9% / 2.4%.

And that's not good business investment return levels - and due to regulatory policy - a worsening one - as more customers - many with regulatory protection against being cut off - amass debts against the business  - sone reports say consumer energy debts trebled in last year.  

Which is another reason likes of Shell selling out.

Likes of Apple, Nike etc have regularly reported well over 10% EBIT in recent good years.

I think only the standard variable tariff is under the profit rules.  These suppliers will want fixed tariffs to make a come back, and perhaps also a reason why Octopus has been pushing out more tariffs as well.

MattMattMattUK

Chrysalis said:

Scot_39 said:

the_lunatic_is_in_my_head said:

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. 

It's not a limit on final profits  - it's an allowance over and above nominal mutually agreed operating and variable in practice wholesale purchase costs.

And it's now 2.4% from Oct 1st afaik.

And it's on a financial accounting metric known as EBIT - earnings before interest and tax.

And despite the potential interest on that £8bn - many energy resellers are operating under high levels of  debt currently.

Due in large part to the Ofgem cap imposed as wholesale costs increased last year.

30 or so firms - large and small alike - so in debt - they collapsed.

And the interest on servicing that debt - does come out of the 1.9% / 2.4%.

And that's not good business investment return levels - and due to regulatory policy - a worsening one - as more customers - many with regulatory protection against being cut off - amass debts against the business  - sone reports say consumer energy debts trebled in last year.  

Which is another reason likes of Shell selling out.

Likes of Apple, Nike etc have regularly reported well over 10% EBIT in recent good years.

I think only the standard variable tariff is under the profit rules.  These suppliers will want fixed tariffs to make a come back, and perhaps also a reason why Octopus has been pushing out more tariffs as well.

The profit cap does only apply to the SVT but it pretty much caps the market, there is very little reason for most users to be on anything else at the moment. Octopus offer what the call experimental tariffs, these are all apart from normal and E7, so the EV, heat pump, flux, various trackers and ToU options etc. and initially they lost money on those although now make a small profit, largely because they buy chunks of power when there are surpluses (night, for EV) mid morning (largely solar, for things like Cosy) etc. Octopus are not trying to make money directly on those tariffs, they are trying to modernise the market, once more people move to ToU and smart tariffs there will be a lot more ways to both reduce costs to the consumer and increase profits.

Grumpy_chap

69bertie said:

I wish we got some easy tracking of consumption like that from EDF.  They can't even plot one point per year (total annual consumption) with any accuracy.

stu12345_2

50 p meters will solve anyone being short for when their variable bill comes in 
all we need is for the meters to accept debit cards every week.
 instead.
pay as you go sorted.