Payments Overview

misterh

I've been with Octopus for some time now and following Martin's show a few weeks ago I took his advice and looked at my energy spending and payments forecast. My payments were £150 and balance £420 and my forecast for exactly 12 months later was around £11 higher and at no point in the 12 months was I expected to be less than £120 in credit. Also, I was being recommended to reduce my payments to just over £145.
So I reduced the payments to £145 (from January) and took £120 back from Octopus.
Now, after a fairly modest bill for November they want me to up my payments to £157 to "keep my balance on track"!
Seriously, how are these forecasts programmed? Are they specifically designed so that we are not just never in the red, but also accumulating positive balances for the energy company to collect interest on? 

Devongardener

You can change your DD on the Octopus website to a level that suits you.   

They did something similar to me but I just entered the amount I knew was sufficient to keep me with a balance of 2 months usage .
They do explain on the website how they calculate future usage but it’s never accurate for me.

misterh

I keep an eye on it regularly. Perhaps I shouldn't as it changes a lot!

Scot_39

misterh said:

I've been with Octopus for some time now and following Martin's show a few weeks ago I took his advice and looked at my energy spending and payments forecast. My payments were £150 and balance £420 and my forecast for exactly 12 months later was around £11 higher and at no point in the 12 months was I expected to be less than £120 in credit. Also, I was being recommended to reduce my payments to just over £145.
So I reduced the payments to £145 (from January) and took £120 back from Octopus.
Now, after a fairly modest bill for November they want me to up my payments to £157 to "keep my balance on track"!
Seriously, how are these forecasts programmed? Are they specifically designed so that we are not just never in the red, but also accumulating positive balances for the energy company to collect interest on? 

Octopus run nearly all contracts based on no debit balances - annualised DD - that includes being covered for 1 month energy - well a bit more - 15% more - as actually 5 weeks at what for many is the end of winter heating season - early Apr - arguably to cover much of that months bill - even if DD not paid.

https://octopus.energy/blog/direct-debit-payments/

Taking back £120 could have resulted in £10 of the DD increase.  As you just shifted the predicted low to zero.

If the £120 low was in early April - you already werent predicted to be 5 weeks in credit at their target time. 

5/(52/12)*£145=167 required -120 predicted before refund = 47/12 = c£4 extra to adapt balance for next 12 months

So £2 more - £145+10+4 = £159 - on what they now want - £157.

EDit - and just to make it clearer

And since you took the refund - the £120 low actually now likely £0 predicted - only if all things went as predicted before - but likely changed a little e.g. £20-25 - to explain the £2 difference.

5/(52/12)*£145=167 required -0 predicted after refund = 167/12 = c£14 extra to adapt balance for 12 months

Things have changed from when interest rates were lower, financing costs were lower, 30+ suppliers hadnt collapsed due to market volatility and those suppliers didnt have iirc last Ofgem figure £4.4bn debt on their hands to deal with.

The regulator and suppliers as a direct result have to be much more focused on cashflow and credit risk, cash reserve levels etc - than they were 4-5 years ago.  The DD pattern proposed by Octopus - Ovo very similar by the way in many respects - so Octopus not unique - reflects that recent history and todays market.

misterh

Thanks Scot_39. I shouldn't be surprised but I was a bit frustrated at how tricky it is to avoid paying too much. I don't really mind always being in credit but a buffer of over £100 seemed just too much.

Scot_39

People who can afford the seasonal variations have options - mvdd or smart prepay - those who cannot - at least save on rates with direct debit about to be around come Jan cap a  difference c £13x pa cheaper than standard credit - and that still means paying higher bills in winter - sometimes on a monthly basis.

But tge time to switch if money tight and seasonal variations a problem to likes of mvdd and you need to be disciplined enough to keep cash in reserve  -  is in spring - Apr say - when bills drop below average again , and bank the difference over nominal, and so have cash in the bank for next winters higher bills.

And last time looked af Ofgem CCB (customer credit balance) data for annualised DD -  for late last year -  the average was around twice your £120 credit - just sub £230 iirc - having dropped c30 in a year.  Even if all year - sub £10 in interest in a good savings account - next yo nothing in a typical current account.  Hardly excessive given advantages to many - like the now £11+ pm saving over standard credit terms.