Increase to Direct Debit - new way of calculating Direct Debit amount?

Went onto a fixed rate in February, my account is over £230 in credit and got email today to say they are putting my payment up £24 a month! Why?

All the time I was on the variable rate I have always been at least £200-£300 in credit and never increased, now I’m not paying enough.  Not good enough. 

Been with OVO for years, when fixed rate up will be leaving.

I agree, our DD has just been hoisted from £178 to £201 despite us having been £300-£500 in credit since I can remember. This was done without any warning and there seems to be no way of reducing it. Particularly as we are going into summer I imagine we will be £1000 in credit by the Autumn. I did a quick check and our bills average out at about £160 a month over the last year. My assumption is they use customers’ credit as an interest free loan. Is this now common practice for energy companies?

Same here. I know you’ll get the stock answer which includes this:

“

Why is my Direct Debit increasing when my balance is in credit?

 

It’s normal for a credit balance to build up in your energy account over summer, when energy use is usually lower. This credit can help pay for your energy in winter, when most homes use more. It helps you spread your energy costs over time. 

 

Even if your energy account is in credit, sometimes your Direct Debit payments still need to increase.

 

This could be the case if we’ve worked out that your OVO account is likely to have a debt balance long term – based on how much energy your home is predicted to use. 

“

...but this is preposterous. I’m using the same energy as last year (slightly less), I have a credit despite it being before summer, and the price cap is coming down in July. So how exactly has OVO worked out that we’re “likely” to have  a debt balance? Why can’t we see this calculation?

At least they used to pay interest when your account was continuously in credit but I don’t really like giving an energy company an interest free loan!

I agree, they are using our money to subsidise all the people who can’t/won’t pay their bills, so their profits are not affected.

I was emailed today "The aim is to make sure you have credit for 1 month's payment in your OVO account by 31 March 2026"  They've also said "This is to help cover any change in your home energy use over the course of the year." Doesn't everyone have a change in energy use over the seasons?  I've always presumed with direct debit payments I'd be ahead approximately half the year, and behind half the year, with it breaking even over 12 months - apparently not. OVO's aim for everyone to be a month ahead in March, before the cheaper months, ensures customers will be in credit most if not all year, so to maximise their profits would have been a more honest explanation.

Never mind, it's prompted me to check, and I'm moving to a cheaper deal with another company.

On the Direct Debit Calculator page, you can see the effect of changing the DD amount on the final balance. Clicking Continue will take you to a page with the recommendation and an expando that explains how the amount is arrived at. It’s not completely transparent, because the estimate of future energy costs takes the projected cost for a whole year, then deducts a seasonally-adjusted amount for the period since 1 April. The whole-year cost is easy enough: unit rate x FAC + standing charge. The deduction needs knowledge of the seasonal weightings … The ‘credit for one month’s payment’ is calculated as 1/12 of the whole-year cost.

It’s been the custom in recent years for the calculator to use next quarter’s rates for next quarter onwards once they’ve been published, so ‘the price cap is coming down in July’ is taken into account. 

While it will seem reasonable to many customers to aim for a small amount of credit at the end of term, the explanation that this is ‘to help cover any change in your home energy use over the course of the year’ is questionable. Domestic energy consumption has been falling consistently each year for the past decade or two, so that should if anything trigger a reduction in the DD amount. 

The days are gone when a DD customer could slide into debt during the winter so long as it was balanced out during the summer. Debit balances have not been allowed for the past few years; see what the T&Cs say. 

I would have to disagree that debit balances have not been allowed, I have had debit balances which I catch up with in the summer. It does seem however OVO are pushing for accounts to have at least a month's credit... so it's probably a relief to them I'm leaving 😆 

OVO clearly does not understand people's frustration. People are most likely to have a low or debit balance at the end of the Winter season, and OVO have chosen March as the month that everyone must have a months credit. This is highly likely to build over the late spring and summer season when bills are frequently less than the monthly direct debit. Why should customers be okay with having hundreds of pounds held by OVO, with no payment of interest, when in the current financial climate so many are struggling, and paying high interest rates on any debt they have? 

There is the option to raise a complaint if you are unhappy with the changes that have been made ​@PGilbert.

This topic explains more about the complaint procedure:
 

Hope this helps.

I have already raised a complaint, and arranged to switch to another supplier

To play Devils Advocate here, and reword your question slightly:

Why should a supplier be OK with having hundreds of pounds of debit balance held by customers, with no payment of interest?

Personally I could see aiming for zero balance on 31st March making sense.
(Although I disagree with how that change was implemented).

Yes it’s a change from what we are used to, but the energy industry is changing.

However I think aiming for 1-months credit on 31st March is over the top.
(And I also disagree with how this change has been implemented).

In my view, having a months credit balance the end of  September or October to help cover higher winter usage would be justifiable, having a months credit balance at the end of March is not.

Of course September/October is not the end of the Financial year.
I strongly suspect that’s the main reason why the end of March (start of April) was chosen, for the year end accounts.

I understand the point you are making, however I am not asking OVO to allow accounts to be in debit for 12 months of the year. My own account is in credit most of the year, goes into debit around January, but this is always cleared. There is, in my opinion, an equity.

OVO ensuring everyone has a zero balance at the end of a 12 month period, even a credit balance to cover rising costs, no problem. Your suggestion of a credit balance in Autumn, given Winter bills are higher, absolutely makes sense.

My objection is to accounts being in several hundred pounds of credit year round, which is highly likely if customers have to have at least a months credit in March.

Unfortunately you keep changing the goalposts and not telling anyone.

Originally if you were on a fixed rate contract you had to be in credit by the end of your deal.

Then it was changed to be in credit by the end of March even if your deal had ended (so would be on a new fix or moved to another supplier)

Recently it seems to be changed so not only do you have to be in credit by the end of March but also have a month's worth of credit.

No attempts to make customers aware of these changes in policy.

I strongly considering moving away from Ovo when my fix ends in the autumn because of this.

That’s why I am leaving Ovo now, because of that very reason

they have tried to double mine, YES… DOUBLE my direct debits! (no prior discussion with me, to see if it was affordable)!!

can you imagine the convenience store you regularly go to,  charging you 100 quid extra next time you pop in,  and when you ask why they say its to keep you in credit for your next visit

unbelievable!

I've recent renewed my fixed price agreement with OVO with a 1 year fix  running through to 12 June 2026.  My previous agreement would have lapsed prior to 31/03/26, so I was always a bit on the fence with the fairness of the DD calculation by OVO as I figured who could really pin down where variable energy prices and the "cap" prior to this and if I wasn't fixed then 🤷‍♂️. 

Now however as an OVO customer for 5 years at the same address with a very stable electricity only demand and with a fixed price that goes beyond 31/03/26, I'm questioning the fairness of this DD policy from OVO which is still insisting I have 1 month DD credit by 31/03/26.  In the guide it says this date is chosen to take account of uncertain customer demand through the winter period, but I don't think this fair.  Is this DD pricing policy driven by the energy regulator or is it just a very blunt instrument OVO has chosen to use to reduce their less reliable customer debt.

Finally, do OVO intend to roll this date forward once the deadline has passed to 31/03/27 ?  

I think I know the answer and I just wondered with all the power of AI, I keep being told about, whether OVO could sharpen up this DD policy to give loyal, simple and reliable customers like me a break from the tyranny of  its "one size fits all" DD algorithm.

That depends a lot on what you mean by ‘fair’. It’s a mechanism designed to avoid uncomfortable shocks when moving from one tariff or supplier to another. The extra month’s credit remains yours until you decide to redeem or spend it; at most, you’ll lose potential interest earned on 1/12 of your annual costs if it were instead put in a savings account. For the typical customer spending £1720 each year on electricity and gas, that’s 60p a month that this buffer might cost. You could have saved enough to post a letter once every quarter, but you wouldn’t get enough to buy a pint of milk each month.

Ofgem and the energy suppliers are doing whatever they can to prevent further accumulation of debt by customers. At the end of 2024, the total owed amounted to £3.85 Bn. This is a long way from being covered by the credit balances belonging to Direct Debit customers, which stood at £3.28 Bn at the same juncture. 

You can see these figures and many more at Ofgem’s site.

Just as a general comment for Emmanuelle_OVO; when the conversation has repeatedly made it clear that all participants have read the (uninformative) OVO material already, it's profoundly insulting to our intelligence to then paste the whole text into the response verbatim just to bulk out your reply. 

Morning ​@neophlegm,

Just to let you know Emmanuelle hasn’t re-posted the original OVO material. Two posts around the same subject have been merged together, with Emmanuelle’s comment being assigned as ‘best answer’. Topics will often be merged together if they are around the same subject.

As Moderators we can only advise of OVO’s standpoint around Direct Debits, and any complaints or issues around the calculations must be discussed with our Support Team.

​@Firedog - I don’t need spurious comparisons on the personal fiinancial impact of granting OVO the right to bank a DD surplus that is based on nothing other than the cash flow demands of OVO.  I asked 2 questions neither of which have been answered. 

NB.  If the interest impact is so paltry why don’t OVO give me the interest repayment (as they used to do in the good old days when I was in credit) instead of keeping it for themselves?   I guess all those pints of milk and books of stamps go a long way towards benefiting OVO's cash flow, but unfortunately do nothing for mine.

Part of that has been discussed previously.

OVO used to be able to run OVO Interest Reward with special permission from Ofgem - that permission was necessary to run it at all because the regular rules didn’t allow it. However, it came with an “open to recall” type clause allowing Ofgem to revoke that permission at anytime.

That clause was triggered a couple of years ago and is the ultimate reason why OVO IR no longer exists. The same is true for ALL suppliers that offered similar schemes - they all terminated their versions around the same time.

Morning ​@Corgimajor,

Thanks for your post. At the moment the ‘one size fits all’ approach in the way we forecast and review Direct Debits will be staying as it is, though our Direct Debit teams will continuously make refinements. As it stands, there are no plans to amend Direct Debit review procedures in certain ways for individual customers. As an long term OVO customer and employee I do understand the frustrations caused by the Direct Debt policies, but we have to make them as ‘fit for all’ as possible, under Ofgem guidelines.