Is it OK or not OK to have a debit balance?

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.

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.

@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.

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.

@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.

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

@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.

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. 

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. 

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. 

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

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