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

  • 14 October 2023
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Firedog
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Why paying by Direct Debit is the best way to pay?

  • it spreads your year’s energy costs evenly over 12 months

... this is not spreading the cost over 12 months, 

 

This is exactly what it does. The projected cost of your energy for the next year is calculated from the Future Annual Consumption figure and the prices and unit rates given on your plan, divided by twelve and adjusted a bit for seasonal variation. This hasn’t changed, and you can see the monthly figures by hovering over the columns in the DD calculator’s Cost chart.

However, when determining how much you ought to pay each month, the calculation then includes the current state of your account. Ideally, it should at the end of September be comfortably in credit, ready to absorb winter’s higher-than-average monthly fuel costs.

  • If it is, well and good. If the calculation shows a large credit balance on 31 March next, you may even be advised to reduce the DD to avoid this.
     
  • If it isn’t, though, something’s not quite right. Any debt at this stage suggests that the DD hasn’t been high enough and ought to be increased to avoid nasty shocks later on. The new calculator simply takes this debt and spreads it over the next few months so that next summer semester starts with a zero balance.

It will never be exact, though, because the next year’s usage will be different from the previous one’s, and tariff changes will of course change everything. That’s why the DD is reviewed regularly, in order to smooth out any sudden changes and so make budgeting easier. 

 

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
U
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@userJP

NOTHING that I have said implies that "the clause would permit OVO to increase the Direct Debit arbitrarily at any time".

 

No, certainly not. I’m not suggesting for a moment that that is what you are trying to imply. But this is what you said:

“ 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. “

I am simply pointing out that the same argument could equally well be used to justify an arbitrary direct debit increase, at any time of year. Whereas I think the clause is actually pinning OVO down to a specific commitment to use the customer’s individual contract anniversary date as the basis of its calculations.

Blastoise186
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Just because it could justify one, doesn’t mean it will be used to justify one.

Ultimately, you are required to pay the bills anyway regardless of how you pay. If you don’t pay, you’ll be chased for payment and/or eventually disconnected (though disconnections ONLY occur in extreme last-resort cases).

I also know that OVO really doesn’t like having to have a Collections Team. But alas, it’s a necessary evil unfortunately.

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

No, it can't, unless you employ truly tortured extrapolation, because there are other contractual, regulatory and statutory factors which place clear limitations on OVO's freedom to change the amounts they draw on a direct debit mandate.

U
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Just because it could justify one, doesn’t mean it will be used to justify one.

Ultimately, you are required to pay the bills anyway regardless of how you pay. If you don’t pay, you’ll be chased for payment and/or eventually disconnected.

I also know that OVO really doesn’t like having to have a Collections Team. But alas, it’s a necessary evil unfortunately.

 

Well, I seem to be inexplicably annoying everyone, which was never my intention. I don’t know what I have said to justify your last two paragraphs.

I’ve made my point, so I shall leave it at that.

(I’ll be back when they change the T&C’s though 😎).

 

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@userJP

No, it can't, unless you employ truly tortured extrapolation, because there are other factors which place clear limitations on OVO's freedom to change the amounts they draw on a direct debit mandate.

I know. I’m not saying the clause justifies an arbitrary increase. I’m saying that (in my view) your interpretation of the clause would logically justify such an increase. That’s why I think your interpretation cannot be correct.

 

The end. I’m gone.

 

Jeffus
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Apologies if this has already been mentioned.  I haven't read all 3 pages of posts. 

I wonder if OVO considered starting the new process on 1st April 2024 rather than now. Of course the change may have been partly driven by the regulator. 

That would have meant variable direct debit Customers would have a Direct debit set based on a full 12 months spring, summer, autumn winter before starting again the following 1st April. 

Would that have helped smooth the transition? 

Am curious to know what people think about that? 

Blastoise186
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Not really. That’d only have benefited people who had cycles starting around March/April time. It’d still throw everyone else under the bus. By doing it now in October, it will have given folks time to build up credit and we are also six months into the new cycle, which could be argued as one of the better times to change the cycle.

There really isn’t a perfect time to flip the switch, but arguably it’s better to do it just around the point where the new (cheaper) price cap just came in than in January - at least it builds up some credit in the meantime.

Either way, you would have to breakfix it at some point and it’s a one-off event so the impact is limited by doing it now.

Securing energy by zapping security bugs... For that is The Blastoise Way!
Jeffus
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Not really. That’d only have benefited people who had cycles starting around March/April time. It’d still throw everyone else under the bus. By doing it now in October, it will have given folks time to build up credit and we are also six months into the new cycle, which could be argued as one of the better times to change the cycle.

There really isn’t a perfect time to flip the switch, but arguably it’s better to do it just around the point where the new (cheaper) price cap just came in than in January - at least it builds up some credit in the meantime.

Either way, you would have to breakfix it at some point and it’s a one-off event so the impact is limited by doing it now.

Interesting.  Thanks @Blastoise186 

For variable DD customers would it have meant they wouldn't see any change on  1st April if OVO had delayed the change? Their DD would have been based on 12 months under the old and new scheme at the point of change over on 1st April? It was a rolling 12 months under the old scheme for those of us on variable DDs?

Is one of issues being raised about the jump in DDs over this winter in the short term?

Must admit I haven't been following everything. Perhaps I have misunderstood. Won't be the first time. 

I suspect my adopted brother would simply have to go into debt if there was a short term additional spike over winter due to the change,  even though over a year things would level out. It is what it is now. 

M
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@Jeffus 

 

Currently there are effectively customers on as many different annual billing cycles there are days in the year, which is an absolute nightmare for the purposes of financial reporting and debt control.

No matter when they changed it, 99.7% of customers would be changing cycles.

I think the real issue is whether OVO are going to be flexible in their management of the customers for whom the change creates or adds to financial difficulties.

Jeffus
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@Jeffus

 

Currently there are effectively customers on as many different annual billing cycles there are days in the year, which is an absolute nightmare for the purposes of financial reporting and debt control.

No matter when they changed it, 99.7% of customers would be changing cycles.

I think the real issue is whether OVO are going to be flexible in their management of the customers for whom the change creates or adds to financial difficulties.

Thanks @MCH59

Are variable rate customers on an annual billing cycle for DD currently? 

I thought the old system was a rolling 12 months when calculating DD for variable customers whenever I have asked before.

Perhaps I have misunderstood? 

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@Jeffus

No, understood correctly. It is just that their cycles all revolved around a different date contract anniversary)

Jeffus
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@Jeffus

No, understood correctly. It is just that their cycles all revolved around a different date.

Thanks @MCH59 

I am a bit thick today

Didn't we all have the same date under the old system, ie 12 months from today?

Then tomorrow it would be 12 months from a day later? 

 

 

Jeffus
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Ah another thought. 

Does the new system mean ovo will have less Customer cash to use every March and early spring? 

Most customers are now on variable plans I understand and most don't get the interest reward as they came from SSE.

If the system works there should be a lot of zero balances in March. 

I wonder if that is a help or hindrance for hedging gas and electricity on the wholesale market. Difficult to know given the erratic nature of wholesale prices these days. It is certainly going to be different for ovo.

Are there many other suppliers following the same process as ovo? 

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. The End

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@Jeffus 

No, I had a senior moment and misunderstood you. The cycles always revolved around the contract anniversary only. They weren't rolling.

OVO will in theory have no credit balances for variable tariff DD customers by 31st March  ... except that in reality many of us pay more than the minimum amount and hope we will still have a credit balance come 31st March 😉

TomThumb
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I’m another customer not happy with the dd / usage forecast only running until the end of March 2024.

Due to uncertainty of future wholesale energy costs, I can see why ovo have taken a more dynamic approach with regard to usage forecasts & associated dd payments, but I’m definitely not looking forward to this type of forecasting.

This undoubtedly will cause a higher degree of fluctuation to my dd payments.

 

I have no issues with ovo suggesting a revised dd figure, but please give the customer the choice to opt in / out.


 

On a side note: my 3rd meter has already suffered the effects of this new forecast system.

Ovo notified me of a change to my dd based on incorrect usage forecast, 

So I immediately changed it back,
 

Ovo asking for confirmation to change any dd payments, would be the preferred way 👍

telling a customer they can always re-adjust any dd payments is a workaround not a solution.

Especially as this gas supply falls well outside of any forecast model.


 

Tom…

 

 

3 meters: Smart Gas & Smart Elec / Traditional Gas meter
Firedog
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I’m another customer not happy with the dd / usage forecast only running until the end of March 2024.

Due to uncertainty of future wholesale energy costs, I can see why ovo have taken a more dynamic approach with regard to usage forecasts & associated dd payments, ...

 

I’m not sure that that’s the reason for this change, which I guess is temporary. I reckon it’s more likely a response to widespread criticism of energy company’s holdings of customer credit, even though some of them claim to be owed more than they owe.

31 March is a date when a well-functioning account will be at zero balance, having used up its credit buffer over the winter. It makes sense to adjust the DD to bring this about by reducing large credit balances and recouping start-of-winter debt which shouldn’t really exist. DD accounts should have a healthy credit balance at 1 October to weather the winter storms.

  

… this gas supply falls well outside of any forecast model.

 

Well, it would. But the forecast model is quite primitive: open the Plan page, then take the Future Annual Consumption and multiply by the unit rate(s). Add 366 days’ worth of Standing Charge and multiply the result by 1.05 to find the estimated annual cost (EAC) including 5% VAT. That’s it.

The figures you see on the DD calculator’s Cost histogram are 1/12 of this figure, weighted to give an idea of seasonal variation. For electricity, these weights vary from 0.1035 x EAC for December to 0.0666 x EAC for June.

Of course, this model will be 180º wrong for your unusual use case; an average gas consumer uses about 88% of his annual total between October and March and only 12% April-September. The calculator’s recommendation would presumably end up with you paying for next summer’s consumption before 1 April. 

If I were you, I’d do my own sums to work out how much I’d have to pay each of the next 12 months and present that to Support with a run-down of your usage pattern. You’d have to incorporate the current state of the account when doing this; if this leaves you in debt at 31 March, it probably won’t wash, but it’s worth trying.

  

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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@TomThumb

The more one digs the more obvious it is that they've made a real dog's dinner of direct debits with these changes. I've now found countless issues and it is going to be a nightmare for customer service to manage..

To be honest, I've never seen anything quite like it. It is madness and will very likely also leave OVO deep in the brown sticky stuff with BACS - and, given that they are registered (twice) with the Financial Conduct Authority, potentially also with the FCA - over how they operate direct debits.

TomThumb
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@Firedog  & @MCH59  Having been shown a ££ figure for attaining a zero balance is / was common practice for the end date of a fixed term contract.

But I don’t ever remember any energy company proactively reducing my dd to reach that target.

I would expect my annual usage & associated costs to be fairly even across the year, (wholesale energy costs / price cap changes forgiven)

But ovo proactively reducing my dd, along side advertising a zero balance target come the end of March doesn’t fill me with hope.


in all essence I suspect it’s more a cosmetic change on how forecasting is displayed more than anything.

But the Jury is still out on that one.

 

Tom…
 


 

3 meters: Smart Gas & Smart Elec / Traditional Gas meter
Firedog
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​​… I don’t ever remember any energy company proactively reducing my dd to reach that target.

 

This is probably a reaction to widely-circulated stories about little old ladies who had managed to build up credit balances in the £’000s without knowing. 

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
H
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To work out your Direct Debit amount, we divide the cost of the energy we think you’ll use in a year by 12. That means your Direct Debit will be £151 a month.

To make sure this amount matches your energy use, we’ll run regular Direct Debit reviews, or ‘check ins’. Simply put, it’s a regular assessment of your current monthly payments, to make sure you’re on track to end your contract (or 12-month billing period if you’re on our variable plan) with a £0 balance. Doing this protects you from having to pay a lump sum. To learn more, head online to our Direct Debit review page.

It’s clear OVO don’t have all the ducks lined up. A welcome email they sent me a few weeks ago clearly states a 12 month calculation on a variable plan although the calculator want to use the 31st March and the calculation is about £130 more than my current monthly usage.

 

(or 12-month billing period if you’re on our variable plan)
Blastoise186
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If you join mid-year, it’ll be a short-cycle for the first “year” before it goes to the real 12-month cycle.

This will self-heal in the next few months anyway, OVO doesn’t need to do anything.

Securing energy by zapping security bugs... For that is The Blastoise Way!
H
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If you join mid-year, it’ll be a short-cycle for the first “year” before it goes to the real 12-month cycle.

This will self-heal in the next few months anyway, OVO doesn’t need to do anything.

 

Your clearly blind to this as they quote - (or 12-month billing period if you’re on our variable plan)

Thats clearly not stating we will calculate your usage till March 24…..

Firedog
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- (or 12-month billing period if you’re on our variable plan)

Thats clearly not stating we will calculate your usage till March 24…..

 

I’m afraid there are many places around the OVO site where the text is outdated after a change has been introduced. However, in fairness, you were referred to this article to learn more: How do direct debits work | Customer Help and FAQ (ovoenergy.com). This explains the new system clearly:
  

How we work out your Direct Debit amount

To work out your monthly Direct Debit amount, we:

  • look at your energy use to date and how much you’re likely to use until 31 March, or the end of your contract if you’re on a fixed plan

  • take into account your current balance and any other costs such as the standing charge and any add-ons you have

  • divide the amount by the number of payments left until 31 March, or the end of your contract, and that gives us your monthly amount

Our aim is to make sure you don’t build up unexpected debt by the end of winter, or the end of your contract if you're on a fixed plan.

  

What is happening in your case, I suspect, is that there is a debt on the account that has to be cleared over the next three or four payments to bring the account balance to zero at 31 March next. You can then start the new 12-month cycle from a clean slate, building credit over the summer to tide you over the winter.

If this is likely to cause you hardship, there’s help available. This may be useful for you: Payment Support Sign Up | OVO Energy 

 

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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