OVO hiked direct debit 15% within first 60 days - what can i do?

Strummer22

Swipe said:

Hoenir said:

plot64 said:

i dont think this year is going to be any colder than the last 2 on average, certainly not significantly. 

The past 2 years have been historically mild though. What you think doesn't accord with the facts. 

It accords with the met office winter forecast which predicts a mild Jan and Feb

Seasonal forecasts never have particularly high confidence. OVO are unlikely to have considered the MetO seasonal outlook in setting the DD!

pseudodox

Does not surprise me re OVO.  They are sharks!  When they took over SSE, who I had been with for 17 years, and I was being moved from quarterly exact payment bills, they stated that my monthly FDD would be an amount that would have been for over double the annual amount of energy I had ever used in those 17 years.  They intended to take 29% of my very limited income every month.  In reality I would have been forced to dig money out of my emergency savings pot and give them a free loan, whilst I lost interest.  When I protested & requested MVDD they said they did not offer that way of paying but I could adjust the FDD myself online.  So I did, but it only allowed a 10% reduction.  Next day they put it back up to the original amount.  I voted with my feet before they could take the first DD and switched to EDF who not only allow MVDD but also set a default FDD in case they did not get readings to produce an accurate bill.  EDF did not know me from Adam but on my figures from 17 years offered this nominal FDD at £120 lower per month than the amount OVO were insisting on taking.

Ildhund

OVO changed the way they calculate DDs on 1 November last, to aim for zero balance by the end of next winter (31 March 2026) instead of over the next twelve months as Ofgem expects. I haven't yet seen any justification for this. It's worth noting that their core terms specifically state that a customer paying by DD is to keep the account in credit. It sounds as if your switch happened just before this change, so it's just unfortunate timing. There's no fancy prediction of future price hikes or weather prospects; it's a simple calculation based on estimated future annual consumption, current rates and current account balance. There is a compensation curve used to indicate likely seasonal variation in costs, but they don't have a great effect on the setting of the DD.

The new system favours customers in debt at the start of winter, because that debt will be repaid over twelve more months, thus producing a lower DD than otherwise. It's tough on those in substantial credit, though, because that too will only be brought down to zero over more months. The obvious best practice for them is to take a refund of the excess credit. 



 

Scot_39

EDF - although the supplier trading divisions - are ringfenced in UK - have a parent company that generates a lot of our power not inly domestically but that taken from the European interconnects.

That level of corporate clout probably allows them a degree of freedom cash flow wise that smaller companies do not have.

And with interest rates back at normal pre crash levels and growing debts - the costs and risks of customer default are clearly higher.

And at least on svt default variable - pricing controlled by Ofgem imposed cap with a tight operating margin - in a highly volatile pricing market -  imposes significant challenges to supplier finances. 

Part of reason many suppliers collapsed. 

There is nothing "sharks" about a company protecting it's cash flow and operating capital needs.

Electricity companies arent as some here seem to think there to freely lend us money - by us paying them after use - like the advocates of MVDD seem to think they are entitled to.  And when they do - of the three prescribed payment methods Ofgem produce caps for - standard credit - Ofgem allow them to charge customers an extra £112 pa for the privelege - in part admin and even postal costs (which Ovo have now added a charge for - years after likes of BT added their £3) - in part cashflow and credit risk.

And other firms are adopting other measures - your better supllier - EDF - are currently iirc should be well into their process of moving standard credit customers to monthly from 3 monthly billing cycles. 
Which reduces there operating capital / negative cash flow costs and credit risk (pretty much to the same level as MVDD in practice).  But are still I suspect charging the full £112 premium rates - but would need to check their current svt rates against Ofgems to be sure. 

Balding_Papasmurf

The guidance on the MSE needs to be updated to reflect the latest scam that the energy companies are running.

I have been in a long dispute over my direct debits. I have reclaimed overpayments twice (at one point over £500 was refunded after the Winter).
Two energy companies have confirmed to me that they don't allow the account to run in the credit/debit cycle that Martin Lewis suggests should be the norm (in other words build up a positive balance over the summer but operate with a negative balance over the winter). Both energy companies confirmed that they calculate the direct debit on the basis of what you use then add an amount to your monthly payment to ensure that you always have a 1 to 2 months' worth of credit on the account so that your account will not fall into debt. So, in the depths of winter, an account using £200 per month of energy will be up to £400 in credit over the winter.

No point switching as they all seem to be running this scam.

A variable direct debit seems to be the answer but they will still be trying to collect too much???

This means one of the big energy companies could have a bank balance of hundreds of millions of ££s of our money funding their business

EssexHebridean

Just because you don’t like a particular (legitimate) way of a supplier operating that doesn’t make it a scam - suggesting it is is actively damaging to the work to ensure that people can spot real scams when they appear, and stop getting caught by them. 

Correct - not all suppliers do now run the credit and debit cycle - and yes, the MSE info is a bit out of date of this.  This is in part because suppliers are now strongly encouraged not to let customers run into debt - and indeed for the majority of folk that’s absolutely fine.

For anyone unhappy with the monthly fixed DD system, most suppliers (not all) operate monthly variable DD as well - where you still pay by DD but all that is taken is the amount that you are being billed for from that month’s bill - this is only for those with a strong grasp on household budgeting though, and most folk would be ill advised to switch to that at this time of year unless you already had a good cushion of money set aside to clear the winter bills. To budget for this once the heavy use winter period is over you work out your annual use (accurately - from readings you have taken or know to be correct) then add 10% to the cost, divide by 12, and set aside that amount of money each month, paying the bills from the accrued balance. 

The idea that the energy suppliers are earning a fortune off credit balances is also a bit of a myth I’m afraid, much as it makes for good rhetoric! 

Scot_39

Balding_Papasmurf said:

The guidance on the MSE needs to be updated to reflect the latest scam that the energy companies are running.

I have been in a long dispute over my direct debits. I have reclaimed overpayments twice (at one point over £500 was refunded after the Winter).
Two energy companies have confirmed to me that they don't allow the account to run in the credit/debit cycle that Martin Lewis suggests should be the norm (in other words build up a positive balance over the summer but operate with a negative balance over the winter). Both energy companies confirmed that they calculate the direct debit on the basis of what you use then add an amount to your monthly payment to ensure that you always have a 1 to 2 months' worth of credit on the account so that your account will not fall into debt. So, in the depths of winter, an account using £200 per month of energy will be up to £400 in credit over the winter.

No point switching as they all seem to be running this scam.

A variable direct debit seems to be the answer but they will still be trying to collect too much???

This means one of the big energy companies could have a bank balance of hundreds of millions of ££s of our money funding their business

The figures on customer credit balances are reviewed and published regularly by Ofgem.

Last I  can remember it was just over £200 going into winter heating season - and was down about £30  on previous year.

Even at 5% if held onto it - that would earn you c£10 is a much voiced argument here - but its already factored into cap rates.

So the truth is them not having it and having to finance energy for payments in arrears - if you like during any negative balance debit on an annual account - would cost an extra £10  - that would just like standard credit term customers and cap - in turn be built into capped DD daily SC and rates.


As Ofgem have stated repeatedly when others called for upto 100% ring fencing of CCBs.  The cash flow implications would be hazardous to market and that would also have cost consequences.

Those paying permanently after supply on the only Ofgem recognised cap for it - standard credit - pay a £112 premium for that credit facility at cap tdcv.

Some of them are now billed monthly - much the same credit and cashflow costs as mvdd to a supplier.

So either their rates should arguably be reduced accordingly or mvdd rates should reflect some of the same costs.

There really is no scam  - just firms operating to maintain their financial health,  backed by a regulator who needs suppliers to be so - healthy and minimally profitable - with a cap 2.4% ebit.

In order to avoid arepeat of 2022 £68 SoLR fees added to all of our bills via electric SC and gas unit rates.

And remember bad debts adding £28 to DD / standard credit caps, less to prepay cap.

Both of which dwarf tge interest even at 5% on that average credit balance figure.

Cash flow matters in business. 

Many firms - small especially - have been destroyed by customer payment delays  - like when large firms switched to paying 90 or 120 days after invoice.


And there is still a sort of credit and debit cycle to your monthly payments.

Start say Apr you pay more than you use- building credit.
Come Nov / Dec you pay less than you use - so in debit on a monthly basis - wiping out that credit. To aim for zero balance to restart the process next spring.

You might expect an average of zero - but the fact that suplliers were £3bn in bad debt last Dec and growing - and increased interest rates for financing operational costs - has destroyed there and Ofgems willingness to operate on that debit basis.

As just the expected bad debt now costs suppliers £10s millions pa - and those on DD / standard credit cap an extra £28 per year to help them finance it / cover it.

Cashflow matters - debt matters - and there are three Ofgem caps with inherent assumptions on that cashflow and now higher debt risk

Prepay - pay in advance  - currently c£48 cheaper than DD
DD - pay as used smoothed over nominal 12m - with a presumption of credit on annual cycle inherent in pricing built into initial cap rates
Standard credit - pay in arrears - currently £112 more expensive

Energy companies do not exist to offer you interest free loans on your account balance by supplying your energy ahead of your payment for it.

And you clearly do not understand how the mvdd system  operates either - as they only take for your previous months actual usage - not more - typically 2 weeks after end of month.

Those that do do mvdd currently are absorbing that financing cost of those on it paying on average 1 month in arrears. 

But not under advice or a regulatory regime cap  - and like Ovo who have abandoned it as debt debt risk and financing costs rose- others may follow or add charges.

The DD cap as costed by Ofgem does not cover mvdd payment in arrears - there is or at least was an inherent credit assumption for at least part of the cycle - and possibly arguably now the complete cycle - if new £0min and so cap costings truly reflect Ofgems anti debt guidance.

Olinda99

switch to Octopus, pay by monthly variable DD