Major change to how OVO calculates Direct Debits

Ildhund

Since October 2023, OVO have followed the procedure summarized in MSE's guide: How energy suppliers set direct debits - MoneySavingExpert. On 1 November last, they introduced a major change which many customers are unhappy about. Instead of aiming for a zero balance at the end of winter (arbitrarily set at 31 March), the calculation now stretches to the end of the following winter, currently to 31 March 2026. 

This has repercussions: those currently in debt now have 12 more months to clear it in easy payments, by adding a little bit to each month's DD. Nice for them. However, those currently in credit will not have any extra (over and above what's needed to keep the account in the black) returned in full until a year and a half hence. The same calculation is used for those on fixed and variable tariffs.

This appears to be in direct contravention of Ofgem's DD guidelines, which expect the DD to be set at a level designed to bring the balance to zero in 12 months' time. 

Any comments?

[Subsidiary: How do I ping the editor of the MSE Guide to ask him to consider updating it?]

MSE_James

Hi @Ildhund  - I've shared this thread with our Utilities team for them to take a look at

MeteredOut

What's stopping those in credit simply asking for a reasonable amount back?

If someone is in credit to more than the projected balance would be in March 2026, by their own rules, OVO should set a £0 DD (though I suspect it might have to be £1).

• look at your energy use so far and estimate how much you’re likely to use by 31 March 2026. This includes any costs, such as standing charges and add-ons

• take away your current balance, factoring in any credit or debt

• divide the result by the number of payments left until 31 March 2026, which gives us your monthly amount

bristolleedsfan

When OVO stopped paying interest on credit balances it also made it more user friendly to request a refund on credit balances.

https://www.ovoenergy.com/refund-policy

• The minimum refund amount is £25, so you must have enough money in your account to cover one Direct Debit payment, plus a surplus of £25 or more to request a refund.

wrf12345

don't they do variable direct debit or switch to pre-payment?

Gerry1

wrf12345 said:

don't they do variable direct debit or switch to pre-payment?

Ovo stopped Variable DDs in 2022 and told customers to go elsewhere if they didn't like it.

wrf12345

"Ovo stopped Variable DDs in 2022 and told customers to go elsewhere if they didn't like it." Another bunch of ......'s

Ildhund

bristolleedsfan said:

When OVO stopped paying interest on credit balances it also made it more user friendly to request a refund on credit balances.

I'm not sure about that. There is a one-click (sort of) function on their website, but it will only allow you to request a maximum refund of (balance - 3 x DD). If you want more than that, you have to call customer service and beg. That's not user-friendly in my book.

They did a trial a couple of years ago to do automatic refunds for those with substantial credit balances. It failed rather dismally. 

In any event, I find it unreasonable to expect a customer to have a positive balance at the end of a fixed-term contract. Anyone planning on switching supplier at that stage faces an eight-week wait to have their balance refunded. There's some justification for aiming for a balance of a couple of months'-worth of usage at the start of the winter semester (nominally 1 October), but this new system focusses solely on the end of the next winter.  

jadedfuture

Ildhund said:

This appears to be in direct contravention of Ofgem's DD Guidlines which expect the DD to be set at a level designed to bring the balance to zero in 12 months' time. 

Any comments?

"The aim is to make sure you have credit for 1 month’s payment in your OVO account by the end of March. This is to help cover any change in your home energy use over the course of the year. 

Thanks for that, I'm struggling to find anything to suggest this policy has been dictated by something official and not something cooked up by OVO themselves.

OVO implied, when I phoned, that they are just following industry guidlines.

With 4 million customers, based on 12th of the price cap, that's an extra half billion in OVO's back pocket.

Time for a sharp exit...

MWT

Ildhund said:

In any event, I find it unreasonable to expect a customer to have a positive balance at the end of a fixed-term contract. 

The fixed element is only on the price, your contract with them for the supply of energy doesn't end when the fixed price ends, so the supplier will use the standard variable rate to estimate your bills beyond the end of the fixed price period which will result in the need for a higher than zero balance.

The liquidity levels required by Ofgem are not helping as it pressures the suppliers to make sure that DD customers stay positive at all times, and similarly it heavily discourages them from offering variable direct debit or pay on receipt of bill.

born_again

jadedfuture said:

Ildhund said:

This appears to be in direct contravention of Ofgem's DD Guidlines which expect the DD to be set at a level designed to bring the balance to zero in 12 months' time. 

Any comments?

"The aim is to make sure you have credit for 1 month’s payment in your OVO account by the end of March. This is to help cover any change in your home energy use over the course of the year. 

Thanks for that, I'm struggling to find anything to suggest this policy has been dictated by something official and not something cooked up by OVO themselves.

OVO implied, when I phoned, that they are just following industry guidlines.

With 4 million customers, based on 12th of the price cap, that's an extra half billion in OVO's back pocket.

Time for a sharp exit...

This is a year old thread.

I'm sure that Ofgem changed the rules & you are expected to be a month in credit in April. Sure this has been brought up in recent threads about DD payments.