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Is OVO now excluding summer when setting minimum Direct Debit amounts?

  • 14 October 2023
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I live in a small flat. My current direct debit has been set at £110 for several months, which (at current rates) is comfortably higher than it needs to be. In fact, just three weeks ago (23 September) OVO was urging me to lower it to £87:

 

 

Today, however, (14 October) I logged in to find OVO recommending £108 instead:

 

To be clear, there has been no change in my (OVO-estimated) Future Annual Consumption, nor have any actual readings been submitted in the past three weeks. The sole reason for the difference is that the earlier recommendation was based upon anticipated usage up to 23 September 2024, whereas today’s figure is based upon how much OVO expects me to use by 31 March.

If minimum direct debits are to be calculated on a 6-monthly basis from now on, customers are going to be faced with high direct debits over the winter and lower direct debits over the summer. We’ve been told that the great benefit of direct debit is having a payment which smooths out seasonal differences. Well, there goes that argument.

Thankfully I’ll not have to increase my direct debit this time around, but I feel for those customers who will face a minimum payment hike going into winter as a direct result of this new method of calculation. Somebody please reassure me it’s just a glitch.

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Best answer by MCH59 14 October 2023, 18:33

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Hi @userJP 

As you have spotted, the Direct Debit calculator changed earlier this week. If you are on a fixed plan, the calculations takes you to the end of your contract and, if you are on the variable Simpler plan, it will now calculate to the end of March 2024.

There is some logic to revolving it around March, because that is when the average consumer who is paying the same amount, month after month, would generally be expected to have their lowest balance (ie around zero if you they are paying the suggested amount) before starting to build up a credit balance through spring, summer and early autumn. 

I THINK it will still work it out over 12 months, but now everyone’s 12 months starts on 1st April.

I haven’t really had a chance to test it yet, but at first glance, the furtive bit seems to be that it now seeks to ensure that you NEVER have a debit balance on your account if you pay the minimum . .. but that is subject to testing and I could be entirely wrong about that

In my case it reduced the minimum payment by almost 10%. although that makes no difference to me because I deliberately pay more. than the suggested. for peace of mind in winter. 

 

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Hi @MCH59 - many thanks for your quick reply. So, not a glitch, alas.

I’m now trying to understand what will happen to the minimum payment after 31 March 2024 on the new calculation. 

Currently, if someone is paying the required minimum, it’s their Future Annual Consumption divided by 12. From now until March 2024, under the new method, it’ll be their estimated Winter Consumption, divided by 6 (which of course means a higher minimum payment for millions this coming winter, quite aside from the price cap increase looming in January).

But what happens after 31 March 2024, in terms of the minimum Direct Debit methodology? Will it be back to Future Annual Consumption, divided by the remaining months to 31 March 2025?

EDIT: Sorry, I see that you have already added to your answer and addressed this point. (I was too busy typing to notice!)

M
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Hi @MCH59 - many thanks for your quick reply. So, not a glitch, alas.

I’m now trying to understand what will happen to the minimum payment after 31 March 2024 on the new calculation. 

Well, I am vacillating a little on this; but once it has settled down, IF tariffs remain the same, which of course they won’t, would the payment not remain the same if annual consumption is steady? … the rider on that being that it won’t fully settle down until the end of March 2025, because they’ve changed it halfway through what I assume is a new standard 12-month cycle for everyone on a Simpler tariff. 

What I am guessing will happen is that, come 1st of April 2024, it will be 12 months worth of future energy use, plus costs, less payments, divided into twelve equal monthly payments, leaving you with close to a zero balance on 31st March 2025 if you make the suggested minimum payments … which is fundamentally how the the old direct debit calculator should have worked, but self-evidently didn’t. because it seemed to have found a thirteenth month from somewhere. 

TBH, I don’t know and I feel I am making too many assumptions here. My head hurts and I really need to have a poke and a play with the calculator to get my head around it.

Blastoise186
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Allow me to use some of the sekrit powers that a Forum Volunteer gets. :D

Hi @MCH59 - many thanks for your quick reply. So, not a glitch, alas.

I’m now trying to understand what will happen to the minimum payment after 31 March 2024 on the new calculation. 

Well, I am vacillating a little on this; but once it has settled down, IF tariffs remain the same, which of course they won’t, would the payment not remain the same if annual consumption is steady? … the rider on that being that it won’t fully settle down until the end of March 2025, because they’ve changed it halfway through what I assume is a new standard 12-month cycle for everyone on a Simpler tariff. 

What I am guessing will happen is that, come 1st of April 2024, it will be 12 months worth of future energy use, divided into twelve equal monthly payments, leaving you with close to a zero balance on 31st March 2025 if you make the suggested minimum payments … which is fundamentally how the the old direct debit calculator should have worked, but self-evidently didn’t. because it seemed to have found a thirteenth month from somewhere. 

TBH, I don’t know and I feel I am making too many assumptions here. My head hurts and I really need to have a poke and a play with the calculator to get my head around it.

You are 100% correct. The system has recently been changed to target ALL Simpler Energy plans to “end” on the 31st March each year for the purposes of the number crunching - this does NOT mean the contract itself ends, just the annual billing cycle used to run the numbers.

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@Blastoise186 

Fabulous stuff. Thanks for confirming that.

Mark

Blastoise186
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We have been watching you recently and your assistance has been most appreciated.

If you keep this up… Something good may happen...

Securing energy by zapping security bugs... For that is The Blastoise Way!
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We have been watching you recently and your assistance has been most appreciated.

If you keep this up… Something good may happen...

Tim had a word during the week ;)

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@Blastoise186

Just so I’m absolutely clear in my own mind about all of this…

From screenshot #1, my required minimum payment (calculated on the basis of my expected annual energy costs) was £87 before OVO’s system change.

From screenshot #2, my new increased minimum payment (calculated on the basis of my expected costs over the next six months only - i.e. autumn & winter) is going to be £108 between now and the end of March.

Supposing no changes to tariff or annual consumption for the sake of simplicity, should my required minimum monthly payment revert to £87 from 1 April 2024?

Nukecad
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 … which is fundamentally how the the old direct debit calculator should have worked, but self-evidently didn’t. because it seemed to have found a thirteenth month from somewhere. 

 

I had also noticed that 'extra month' and worked out what they do, or rather what their computer programme is doing, and where the extra month comes from..
It's all about the timing of when the calculation is done; and I don’t think it will change in future.

They have always notified me of changes more than half way through a monthly billing period, they call the account balance at that point 'debt' and add it to the averaged estimate for the next 12 months.

That way the computer is always going to be calculating for at least 12.5 to 13 months (more if the account is in debt*) and dividing it into 12 payments.

Many would say that it’s a bit sneaky doing it that way, although the numbers are correct - at the time that the calculation is done.

If you get them to re-calculate just after you have paid a direct debit then the outstanding balance will be lower (only one or two days usage), so the averaged amount to pay each month will be lower.

 

*I was transferred from SSE last January. The higher winter usage, especially with the high tariff at the time, meant that my transferred account balance was technically £500+ in debt, further increasing what OVO wanted paying each month.

It still is in debt although that debt is reducing rapidly because my current DD payment is over twice my current usage. I calculate that with my current payments that 'debt' will be gone by the end of January 2024, 12 months after I transferred to OVO so to me that's bang on the original target at transfer - although OVO's computer seems to see it differently.

OVO still regularly want to put my DD payment up more. to around 3x my actual usage, simply because of the way that their computer is calculating things, and no doubt the computer will now want to try and put it up even more because it will now only be calculating up to the end of March.

Today I have zero energy, so I'm going back to bed.
M
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@Nukecad

You could be right; BUT, as chance would would have it, my account cut over to a new billing period yesterday morning and so far there is no a hint of the 13th month behaviour that I would have expected with the old Direct Debit calculator ... in fact, the opposite, my minimum payment has dropped by £1 since yesterday when I would previously have expected it to creep up by £1.

Likewise, my predicted future credit balance for 31st March has increased by £2 since yesterday, whereas I would previously have expected that future credit balance to fall a little.

Time will tell. 

The calculation from 18 hours ago is up above and here is how it is right now: 

 

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@Nukecad

I wouldn't say that the 13th month stuff was at all sneaky; BUT it was problematic in that it self-evidently wasn't working as per the explanatory note on how the Direct Debit Calculator arrived at the suggested payment amount.

 

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@Blastoise186

Just so I’m absolutely clear in my own mind about all of this…

From screenshot #1, my required minimum payment (calculated on the basis of my expected annual energy costs) was £87 before OVO’s system change.

From screenshot #2, my new increased minimum payment (calculated on the basis of my expected costs over the next six months only - i.e. autumn & winter) is going to be £108 between now and the end of March.

Supposing no changes to tariff or annual consumption for the sake of simplicity, should my required minimum monthly payment revert to £87 from 1 April 2024?

 

If the answer to the above is “yes”, then it follows that my minimum payment over the next 12 months will increase from (12 x £87) = £1044 to (6 x £108) + (6 x £87) = £1179. Yet £1044 remains OVO’s estimate of the costs I am likely to incur over this period.

In other words, my direct debit is going to be set so that I shall have no option other than to pay £135 by way of direct debit over and above my estimated actual usage for the next 12 months.

There are going to be people who will find themselves in financial difficulty this winter as a result of this new obligation to deposit funds with OVO in excess of their annual estimated costs. I am struggling to understand how that can be fair. Particularly when it was introduced without warning.

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@userJP

Bearing in mind that the old Direct Debit Calculator didn't actually work as advertised ..… and that this only affects customers on the Simpler variable tariff paying by direct debit.

IF it does indeed work like that, then there will certainly be customers in the same boat and there will be just as many who will see an equally significant drop in payments ... and two thirds of  customers will have a relatively minor movement either way.

Counterintuitive as it may seem, the people who are likely to struggle with that sort of change are already far less likely to be paying by direct debit on a variable tariff and a significant number will also have a £300 DWP cold weather payment arriving between now and the middle of November.

Let's not jump to conclusions though, because I think @Blastoise186 was referring to my explanation about every Simply customer being put on the same standard cycle, rather than the specifics of the resulting Direct Debit calculation.

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If the answer to the above is “yes”, then it follows that my minimum payment over the next 12 months will increase from (12 x £87) = £1044 to (6 x £108) + (6 x £87) = £1179.

 

Make that £1170, not £1179, sorry. 🙄  So a difference of £126, not £135. It’s confusing enough as it is without my having to add arithmetical errors to the mix.

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@MCH59

I think the basic point irking me is that I feel it is wrong in principle for OVO to require even one of its customers to make minimum payments over a 12-month period which, when added up, exceed that customer’s predicted annual costs. And it seems that is going to be the situation in my case, at least.

Firedog
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The new system hasn’t been in operation long enough for me to work out just how it works, but I’d just say that there are a couple of backstage pages at account.ovoenergy.com that show some of the figures used to populate the web pages. You might like to have a look and see if you can make sense of the JSON.

The old system, giving also the 13 monthly figures:
smartpaymapi.ovoenergy.com/pace/recommended-dds/v1/1234567/projected-costs?limitNextYear=true
The basis for calculating the monthly estimates is at the end of the page.

The new 31 March system:
smartpaymapi.ovoenergy.com/pace/recommended-dds/v1/1234567/recommended-direct-debit

(In both cases, replace 1234567 in the URL with your actual account no.)

To access them, open a browser window and sign in to account.ovoenergy.com. Then open a new tab and paste the URL into the address bar there. Beware: the access token created when you sign in expires after 30 minutes, so if you see an error, revisit the account page and sign in again to store a new token. 

 

I’d also point out that DD customers are contractually obliged to maintain a credit balance on their account. This is clearly not strictly enforced so long as the customer keeps his nose reasonably clean, but I suppose it could be invoked against customers who refuse to toe the line. 

Noel | I have no official status; I'm just a volunteer who comes here to help other customers. My gear: Aclara SGM 1416-B Electricity-only E7 meter; Chameleon IHD3-PPMID-AAA
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I’d also point out that DD customers are contractually obliged to maintain a credit balance on their account. This is clearly not strictly enforced so long as the customer keeps his nose reasonably clean, but I suppose it could be invoked against customers who refuse to toe the line. 

 

Thanks for linking to the terms & conditions @Firedog. It seems the contractual term relating to my specific concern on this thread is also under clause 7.11 - this one here:

“We can ask you to increase your Direct Debit amount anytime if prices change (in line with this contract) or you’re using more energy than we estimated. If you don’t do this by the date we give you, we can automatically increase your Direct Debit to an amount that means your account won't end up in debt by the date of your contract anniversary“ (my emphasis).

I’m not seeing anything in the T&C’s about the 31st of March supplanting the contract anniversary as the “zero balance” date for direct debit calculation. And if such a contractual change were to be introduced, I’d expect reasonable notice to be given in terms of clause 9.2.

 

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@userJP

I totally get what is irking you, BUT read that paragraph from the T&Cs again. 

It doesn't actually say that the contract anniversary is the zero balance date .. it just says that you won't end up in debt by the anniversary.

"We can ask you to increase your Direct Debit amount anytime if prices change (in line with this contract) or you’re using more energy than we estimated. If you don’t do this by the date we give you, we can automatically increase your Direct Debit to an amount that means your account won't end up in debt by the date of your contract anniversary“

If a customer is paying the minimum amount when 31st of March is used as the lowest credit balance date, then that same customer, who is making the minimum suggested payment, will not be in debt on the contract anniversary date either.

 

Jeffus
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Some updated wording provided by OVO on positive and negative balances 

Some months, we might take less than the set payments you put in, because you didn’t use as much energy. This would result in you having a positive balance. Other months, we might take more from the pot, because you used more energy. This could lead to you having a negative balance.

We aim to get your balance to a healthy level by the end of winter (31 March), or the end of your contract if you're on a fixed plan.

https://www.ovoenergy.com/help/article/how-your-account-balance-works

U
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Userlevel 2

Some updated wording provided by OVO on positive and negative balances 

Some months, we might take less than the set payments you put in, because you didn’t use as much energy. This would result in you having a positive balance. Other months, we might take more from the pot, because you used more energy. This could lead to you having a negative balance.

We aim to get your balance to a healthy level by the end of winter (31 March), or the end of your contract if you're on a fixed plan.

https://www.ovoenergy.com/help/article/how-your-account-balance-works

 

And this is how it used to look:

https://web.archive.org/web/20230821113440/https://www.ovoenergy.com/help/article/how-your-account-balance-works

Blastoise186
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I think you’re reading into it more deeply than you need to. Sometimes there’s nothing more to see beyond what’s already written in black and white.

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I think you’re reading into it more deeply than you need to. Sometimes there’s nothing more to see beyond what’s already written in black and white.

 

Here’s what’s written in black and white:

“Why paying by Direct Debit is the best way to pay

Direct Debit is usually the best way to pay bills because [...] it spreads your year’s energy costs evenly over 12 months”

https://www.ovoenergy.com/help/article/how-do-direct-debits-work

 

The new system change means my minimum direct debit for the next 6 months is going to be £108, and (presumably) £87 for the 6 months after that (tariff changes aside). Can this really be described as spreading a year’s energy costs “evenly over 12 months”?

Blastoise186
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In this case, there’s a one-off “sync issue” while everyone’s accounts are being realigned to the new calculations - but ONLY if you’re on Simpler Energy Direct Debit. By the time we hit April 2024, that re-sync will be completed automatically and the 12 month cycles will just work from that point.

You cannot predict the future though, so it’s best not to speculate on what your future DD will be. Recent events may cause prices to spike again...

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Yes, but it’s precisely the one-off sync issue that I’m objecting to. If I were currently paying the minimum, then the system realignment wouid have two consequences for me:

(i) I would have to pay at two different rates over the course of the next 12 months, with the higher rate kicking in immediately and unexpectedly;

(ii) I would have to pay £126 in excess of OVO’s current forecast of my annual energy costs.

Both of which seem to me reasonable concerns.

Blastoise186
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Sometimes, you gotta break stuff to fix stuff - this is what’s known as a Breaking Change. A bit like you’ll have to get off of Windows 7 sooner or later - Firefox won’t support you beyond September next year and then things will really start to break for you.

It’s only a one off, so the best option is to ride the storm and let it sort itself out.

Securing energy by zapping security bugs... For that is The Blastoise Way!

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