Hi,

Forum volunteer here.

That’s fine. As long as you continue paying at least the minimum amount via DD each month, you won’t end up with Collections. It’s expected that you’ll spend part of the year in Credit and part of it in Debit, so you should be fine. As long as it’s all ultimately paid off, that’s what counts.

To be safe though… Try making it £120 a month and see what that does.

Thanks, that’s certainly reassuring!

I thought that would be the case, but the Direct Debit Rules in 7.11 of the T&C’s did have me wondering:

“When you agree to pay us by Direct Debit you agree that:

p...] account in credit - you’ll keep your energy account in credit by paying for the supply in advance.”

I’ll check that one with the forum moderators. Bear with me!

But ultimately, as long as your payments go through each month successfully and they’re at least what the minimum amount is, you should be good. OVO will let you know if they need increasing.

Hi @userJP , the ‘norm’ would be for you to have a months credit on your account from what I’ve seen. I used to have the same situation as you describe but I think due to the problems with energy companies going to the wall, most now operate on a payment ‘up-front’ basis. 
Having said that, the system should prompt for an increase in your dd so if it’s happy for now, perhaps leave it until then

@BPLightlog Yes, I wish the official position was a bit clearer. I did come across an official explainer page on the OVO site which said something to the effect of “if you go into debit for a while, that’s fine too” - but I can’t remember now where I saw it.

Ah, found it!

How does your account balance work?

The amount of energy you use changes. You might use more in winter when it’s cold and dark. And less in summer, when you don’t need your heating or lights as much.

Think of your energy account balance like a pot of money – set payments go in, different amounts come out. Each month we send you a bill for the energy you’ve used, and take the amount you owe from this pot of money. Some months we might take less than the set payments you put in, so you might have a positive balance. Some months it might be more and you might have a negative balance. But don’t worry, it’ll all even out.

We’re aiming for you to have a zero balance at the end of 12 months. So you won’t have to pay us a lump sum of money.

https://help.ovoenergy.com/article/3a8ed44a-96c6-4312-b55a-df5484ff2e82-web

That does seem clear enough, now that I read it again.

It’s really encouraging to see a customer caring about the state of his account balance instead of simply moaning about the size of the Direct Debit.

However, you missed an important factor when doing your sums. The calculation for a Standard Variable Tariff is DD = (Current balance less predicted costs) / 12.

If the current balance is negative, then of course the amount has to be added to the predicted costs if the end result is to be zero in a year’s time. 

One problem that some customers face is that their estimate of future costs doesn’t always agree with OVO’s. You can see how much energy in kWh they think you’re going to use in the next year on the Plan page of your online account. You’ll have to compare this with your bills to see whether it’s anything like, and it sometimes isn’t. 

Once you’ve done your sums: multiplying the amount in kWh by the applicable rate, adding 366 days’-worth of standing charges and adding 5% VAT, you’ll see how close this is to your estimate of £1320. 

If the calculations in your image are reasonably accurate, I would say that your predicted shortfall of £90 in April isn’t looking good. Quite a lot depends on at what stage in the billing period the DD is taken, but you should really aim for never going into debt, barring unforeseen circumstances, of course. This could be easily remedied by a payment of £90 now, to put your account into credit. The DD calculation would then work out at £103.

The calculator at the website would do this all for you, except that it can’t show you what changing your balance by means of a direct payment would do. And, of course, everything depends on regular meter readings, which is one very good reason to have a smart meter.

OVO don’t charge interest on debt (at the moment), so it’s really up to you and your conscience whether you’d rather take an interest-free loan from them than shell out an extra £90 now for peace of mind. I know what I’d do in your shoes, but I’d be keeping an eye on the Billing pages to be sure of the situation at any particular time. Sadly, I’m not quite sure what you’ll see there, because it’s very different for those like me who have a smart meter. Perhaps you could tell us by means of a screenshot.

Hi @userJP 

I assume you are on the default Simpler Energy Plan

If so you can see how much in kWh and £ OVO think you will spend over exactly 12 months  including vat (ignoring any credit you may have, although you said zero credit expected at 16 July anyway)

On the ovo website 

https://products.ovoenergy.com/journey/renewal/energy-renewal

Look on the Tariff Information Label for the Simpler Energy plan.

You can conpare this to any figures you calculate.

Here is mine for example 

Important to remember the standing charges and unit costs  are variable. Ofgem provide updates of the maximums every three months, but suppliers can change them at any time subject to these maximums and appropriate notice.

So you will need to re look at your figures regularly. as the price cap changes..

The lack of fixed rate plans on offer below the current price cap gives some indication that prices are currently expected to rise a bit over winter unfortunately. Hopefully not very much. You may well find your January onward costs over winter are higher than you think.

Many thanks @Firedog and @Jeffus  for your insights. I realise my graphic is very schematic, and unlikely to be mirrored exactly in the year ahead. But it does illustrate the point I wanted to get some clarity on: namely, whether the Direct Debit set-up is designed to cover negative as well as positive balances, or whether (as the T&C’s appear to suggest) there is an obligation on the customer to keep their account permanently in credit.

On the one hand, the OVO explainer appears to settle it: “Some months it might be more and you might have a negative balance. But don’t worry, it’ll all even out.” That’s in line with the interpretation offered by @Blastoise186. It’s also the way the Direct Debit scheme was explained to me as an SSE customer when they introduced it a few years back (I remember they had a sine-curve seasonal graph with half in positive balance and half in negative - I’ll see if I can dig it out).

“OVO don’t charge interest on debt (at the moment), so it’s really up to you and your conscience whether you’d rather take an interest-free loan from them than shell out an extra £90 now for peace of mind. I know what I’d do in your shoes...”

I don’t see it as a matter for pangs of conscience, to be honest, since the situation is entirely symmetrical: OVO gets an interest-free loan from me for half the year, I get an interest-free loan from them for the other half. So it balances out exactly. And again, SSE gave me to understand that the scheme is designed to work in precisely this way.

That said, I’m quite prepared to bring the account into credit (and keep it there) if there’s now a contractual requirement to do so as a condition of using the Direct Debit scheme. Is there, though? That’s the point I’d really like to focus on, because I’m not clear in my own mind about it.

Can I rely on that OVO explainer which says that negative balances are OK? Or has this website advice been superseded by the contractual Direct Debit Rules? They do appear to be in conflict, on the face of it.

@userJP Honestly, given this is a forum of customers helping each other out, you either need to phone/webchat OVO directly to get anything absolutely confirmed about their process if you are still unsure or look out for a post from an OVO moderator with _OVO in their name.

I say that as a general comment rather than specifically about this topic. 

@Jeffus. I’m hoping that an OVO moderator will maybe chime in with a definitive response.

It isn’t an academic question, from my perspective - it’s a very practical one. If I’m going to have to fork out £90 or so on top of my usage costs in order to comply with the Direct Debit requirements, I’d much rather know for sure now, rather than wait until February and find out the hard way.

Also, at that sort of “start-up” cost, there would be much less of an argument for someone in my position choosing Direct Debit over Pay on Demand.

The graphic below shows how SSE were presenting their Direct Debit scheme in May 2020. I’m not suggesting that the position of OVO in 2023 necessarily ought to reflect that of SSE in 2020. I’m simply trying to establish whether, from OVO’s current perspective, there is anything wrong with my account having a debit balance for half the year.

It shouldn’t be a riddle wrapped inside a mystery, with website advice and T&C’s pointing in opposite directions.

Hey @userJP 

You’ve had some really great advice here from our volunteers!

You’re correct in understanding that you are ‘okay’ to go into a debit balance while on Direct Debit.

Due to the agreement and the way that this is set up over the year, if you’re in a debit balance, that’s okay, as we intend for the Direct Debit to even out the balance throughout the course of the year. It’s typical for accounts on Direct Debit to go into debit through the winter period, and then build up credit again during summer when you’re maybe not using the heating or lights as much as winter. 

If you have any questions specific to your account, you can direct them to the Support Team for more information.

Perfect, @Abby_OVO! That answers my question, thank you.

@userJP what do you see on this page on the website ?

https://account.ovoenergy.com/payments/direct-debit/calculator

Here is mine for example. How does the ovo view of your usage compare to your thoughts on your usage you posted in your first post?

Or the balance view on the same page. Here is my example with a negative balance in some months

@Jeffus. Yes, mine is much the same as yours in terms of the curve. Although my heating is switched on in October and off in April, I don’t really have a sharp step-change from £80 in summer to £140 in winter. I just used those figures for the sake of argument, in order to keep things simple.

The thread was never actually intended to be about my personal usage - apologies for not making that clearer at the outset. I was puzzled by the wording of the Direct Debit rules, and wanted reassurance that my account can have a debit balance for a few months of the year and still be in good standing. Abby has now very kindly confirmed this.

I still think that the overriding principle is “you’ll keep your energy account in credit by paying for the supply in advance.” In exchange for this undertaking, OVO charge you a bit less than those who’d rather run up a slate and then pay it off. If you agree to this and play fair, then the odd descent into debt won’t frowned upon. Playing the system by maintaining an average balance of zero over the year isn’t in the spirit of the DD system, to my mind.

Your SSE screenshot shows what I would expect to see: a varying balance, dipping down to zero in the middle of winter - not dipping down to a large negative balance. Abby and I clearly have different interpretations, but to my mind the Terms are clear. This is why we see in several different scenarios that there should always be enough to cover one month’s usage in the account. If the DD calculation is at all accurate, that means maintaining a balance of at least one DD’s worth.  

Perhaps I’m wrong.

Just some of my general thoughts on credit balances rather than anything specific about what has been said. 

Ofgem don't see it like that for the default price cap tariffs. 

They do say if you pay by DD you should pay less than other payment methods, although at least temporarily pre payment customers pay a similar amount to DD customers depending on their usage. 

So for example for the few suppliers that still allow variable direct debits as an option you never have to pay for your energy in advance if that is how you like to manage your money. We have seen quite a few posters on the forum switch supplier for that reason. 

There is no consensus in the industry about how customer credit balances should be managed, some suppliers e.g. EON and British Gas campaign for ring fencing, other suppliers that they should be able to use the customers cash for other things.

Personally I would prefer companies are properly capitalised by their owners rather than relying so much on customer credit balances so we never see a repeat of over 30 companies going bust, and all customers from every supplier having to pick up the  cost of these lost credit balances via a levy on our bills. 

Regulation of the gas, electricity and water industry has failed consumers in my opinion. 

Interestingly I don't personally feel under any obligation to keep a positive credit balance every month. If I switched supplier in winter I would be in debt with my energy company within weeks if I payed by fixed DD. I don't have an issue with that, knowing I would come back into credit in summer. 

@Jeffus 

regarding “…..over 30 companies going bust, and all customers from every supplier having to pick up the  cost of these lost credit balances via a levy on our bills”, do you know how that’s going and how long we’ll all be paying for that ?

You could go through all the ofgem price cap announcements and see how much you have paid to date. I haven't spotted anything that consolidates the payments. Others may have the data. 

The costs are loaded onto the electric standing charge so everyone pays the same irrespective of usage. It is the SoLR figure.

So low user electric only customers pay a higher percentage of their overall bill to cover the failures. 

Bulb is different and I had haven't kept up to date on what the government will do with the costs before Octopus took them over. 

Obviously the green levy on electric standing charges is also increasing to fund things like all those grants for heat pumps. Also the electricity network upgrades for net zero are being loaded on etc. Be interesting to see how ofgem evolve the way we pay for things. 

The SoLR levy will reduce to zero  naturally over time, especially with the dramatic fall in gas prices recently. £19 in the last announcement from Ofgem. This is the previous period as an example. 

Citizens’ Advice produced a meaty, critical overview of the situation in December 2021. It says that from 2022, every household would be paying £94 a year towards the taxpayers’ costs of failed companies. There are lots of data in the report, with links to where they came from. It’s very informative and equally depressing: Market Meltdown - Dec 2021_v2 (1).pdf (citizensadvice.org.uk)  

The estimate was based on the assumption that non-domestic gas consumers would not be expected to foot the bill for protecting domestic consumers following the failure of their supplier. It didn’t include the eye-watering sums required in the wake of Bulb’s collapse. I haven’t looked for the effects of these factors on the amount we’re paying today.

The idea of energy account balances is fascinating as I used to specifically try to switch supplier during the last few months of a year so that I got to use their ‘credit’ during winter and catch up during summer. 
With OVO that has not been possible. When I switched (October), their calculations suggested I needed a much higher level of direct debit than I was prepared for. When challenged, I was able to manage my account but promised to keep it in credit - even by a pound or two in some cases - keeping my direct debit at reasonable levels. This has actually meant that by the end of my contract, I will be in a significant credit situation (hence my original calculations were correct) and am now in a situation to need to manage this. 
The overall question of account balances does need some attention but I do agree that any supplier should be sufficiently capitalised as to be able to manage their cash flow efficiently. The consumer also needs guidance as to what the expectation is for the contract term. 

The DD calculator shouldn’t allow this; it’s designed to produce a zero balance at the end of a contract, or in a year’s time for those on a variable tariff. What does your say?

Well at the moment it’s telling me to reduce my dd to £5 (a minimum I believe)

So what’s the problem?

I’m not saying that I have a problem as such but … early in my contract, I couldn’t set my dd at a level I had calculated as appropriate. Now, even though I can reset it to the lowest level, I would still end up with a fairly high credit balance. 
Perhaps with more recent developments the calculator has been adjusted. I was simply commenting on the various inputs to say that although the op (and others) mention the nature of a credit and debit balance through their contract, mine originally would not let me set a level I knew to be correct which would have smoothed out over the term