Simple chart shows exact dates when you could be owed cash as energy bills fall
ENERGY suppliers are holding onto an estimated £3 billion worth of customer credit.
It means millions of customers could be due hundreds of pounds back in refunds.
According to MoneySavingExpert.com, almost two-thirds of households that pay their bills by direct debit are affected.
But you shouldn’t assume you’ll always be in credit at the same time as other customers.
This is because of the way the direct debit cycle for energy bills works.
When you pay by direct debit, your supplier calculates the cost of your energy for the year ahead and divides this into 12 equal payments.
However, to smooth things out over the period and avoid high bill shocks in the winter, customers are more likely to build up credit during the warmer summer months.
As the payment method is worked out in advance, it’s usually based on estimated usage.
If you don’t submit regular meter readings, your estimations could be overinflated, and you may find yourself in more credit than you need to be.
During the summer months, households tend to use less energy, so it’s likely you’ll begin accruing a credit balance at this point.
However, experts, including Martin Lewis, suggest that if you have a large amount of credit right now, you should query for a refund.
Understanding how the direct debit cycle works is important to understanding whether now is the right time to ask for this.
THE DIRECT DEBIT CYCLE
It’s easiest to understand how this cycle works by assuming you had a zero balance with your energy supplier on January 1 of each year.
From this point onwards and up until May, you’ll usually begin to build up a debt.
This will normally be used to cover any extra usage over the colder winter months.
Once you get to May, that debt begins to fall, and you’ll return to a zero balance as the weather warms and your usage drops.
As your usage continues to drop in the hottest months of the summer, you’ll build up credit with your supplier from late August to help cover heightened bills in November and December.
At this point, the credit cycle begins all over again.
However, it’s important to note that if you started the cycle at a different point, you might not have any energy credits across the 12 months.
However, if you have more than two months’ worth of credit right now, that’s usually too much, and you should ask for a refund.
How do energy direct debits work?
THERE are two main types of energy direct debits - fixed and variable.
Most energy customers pay a fixed direct debit, which means you pay a fixed amount every month.
Your energy company will work out the cost of your energy for the year ahead and divide this into equal payments.
Most energy firms will use the average amount of gas and electricity used in previous years to calculate your monthly instalments.
With a fixed direct debit you can spread the cost of your energy use without any surprises.
If your energy supplier has upped your fixed direct debit amount even though your usage is down, you can request that the fixed monthly charge is brought down – we’ve explained how to challenge your bill below.
Those on fixed direct debits are more likely to build up credit during the warmer summer months and if you’re in credit but your direct debit has risen substantially this winter it’s worth challenging it.
Some energy companies give customers the option to pay with a variable direct debit.
With a variable direct debit, you can choose to pay a varying amount every month or every quarter, depending on the energy you use.
You’ll pay for the energy you use, this means you’ll likely pay more in the winter and less in the summer.
Some experts argue that this type of direct debit method makes it harder for households to budget in the colder months but if you only want to pay for what you use each month then a variable direct debit may be a safe bet.
So, if you have a lot of credit now, you can request to get your cash back – we’ve explained how below.
REQUEST A CREDIT REFUND
First, make sure your energy firm has the most up-to-date meter reading.
If your reading doesn’t match the energy use they have down for you, chances are they’ll want to update your monthly bills as you may not be paying the right amount anyway.
But if your meter readings are up-to-date and f you’ve been in credit for more than one month ask your energy firm to return the funds.
Each energy supplier has its own process for customers wishing to get a credit refund.
For example, British Gas rules state that it will always hold a £75 energy credit on live accounts.
The supplier will only refund you if there’s £5 or more left over after it’s put a £75 credit towards your bill.
Customers can request a refund by logging into their online account.
Ovo Energy customers can request a refund if their credit is at least £25 higher than one month’s direct debit.
After submitting a meter reading to your online account, customers should head to the payments page and click apply for a refund.
Check with your energy provider to find out how to request your money back.
We’ve previously explained the rules for each energy supplier – so check exactly how you can request a refund.
If your supplier won’t offer a refund or you think that your direct debit is set too high, you can also challenge your bill.
How do I calculate my energy bill?
BELOW we reveal how you can calculate your own energy bill.
To calculate how much you pay for your energy bill, you must find out your unit rate for gas and electricity and the standing charge for each fuel type.
The unit rate will usually be shown on your bill in p/kWh.The standing charge is a daily charge that is paid 365 days of the year – irrespective of whether or not you use any gas or electricity.
You will then need to note down your own annual energy usage from a previous bill.
Once you have these details, you can work out your gas and electricity costs separately.
Multiply your usage in kWh by the unit rate cost in p/kWh for the corresponding fuel type – this will give you your usage costs.
You’ll then need to multiply each standing charge by 365 and add this figure to the totals for your usage – this will then give you your annual costs.
Divide this figure by 12, and you’ll be able to determine how much you should expect to pay each month from April 1.