OVO Direct Debit Forecast Period - Fair or Unfair?

  • 15 March 2023
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On another thread I’ve been trying to make sense of OVO’s DD Algorithm as recent days have seen my recommended DD payment zooming down and then zooming up again.  However one thing that surprised me when I looked at today’s DD recommendation is that is is currently being estimated over the next 12 months.  See image below.

Given, like lots of others I’m now a “Simply Energy” customer on a rolling variable tariff,  I was surprise - if not a little shocked - to see OVO basing my current DDs on next winters demand for 2 reasons:  Firstly how do they know I’ll still be an OVO customer in 6 months time, never mind 12 months time. Secondly, how do they know what energy prices will be from Oct 2023 to Mar 2024 and if they do why are they not offering customers the option to take out fixed term plans at this price (they are offering no fixed rate plans at this time).

Is this “12 months’ time” DD adjustment a new thing or has it just been introduced?  I think it must be new as my own forecast balance was previously in line with OVO’s DD forecast and this was based on it being calculated at the end of September 2023.

What do people think?  

  • Is this some calculated change by OVO in their DD algorithm to boost cashflow this summer from their customers by unreasonably factoring in an obviously much higher demand scenario.  
  • Or is a reasonable attempt to smooth out their customers winter pricing peaks.  

On the basis this is aimed at a largely rolling variable price customer base, who currently have little or no options to shop around in the energy market place, I think it is the former.

 

 


11 replies

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This topic has come up before over the years. 

OVO and other suppliers assume with the default variable rate tariff  that the DDs are calculated on a rolling 12m basis. 

With a fixed rate the DDs are calculated based on the end of the fixed term. 

That feels reasonable to me. I don't have any issues with that. It is not new. 

On the variable tariff it is assumed the rates remain the same for the 12 months. They use to get updated every 6 months by OFGEM, they are now updated every 3 months. 1st April, 1st July, 1st October, 1st January. Every time the rates are updated by OFGEM so your rates on the plan page are updated and the DDs are updated, so 4 times a year. You get an email from OVO to communicate the new rates and DDs. Ofgem made the change from 6 to 3 months due to the volatility in costs and the 30 failed suppliers who couldn't react quickly enough to rises in wholesale prices. 

At any time you can call collections and ask for any credit balance to be refunded if you are on the default variable plan

If you are on a fixed plan you have to leave one months credit. 

There are very different views among suppliers and others about credit balances. OFGEM collated views from various parties including suppliers. Some ring fence them in segregated accounts and get zero benefit from them. Others use some of the money as part of their overall hedging strategy which all suppliers have to do. We had 30 suppliers mess this up and go bust... We are all paying for these failures with a levy on our bills. 

It is a complicated area, along with the idea of DDs smoothing costs generally vs pay on demand DDs. 

It will all get more complicated when time/type of use tariffs become the norm as we get closer to net zero. 

 

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Hi @Jeffus,  Thanks for the reply.  You have the benefit of following my other, not unrelated, thread on this.  I just can’t understand the volatility of an algorithm that on Sat 11th March suggested my balance was going to be minus £183 and suggested a DD of £184 (down from where it had been at £242) to 4 days later saying my DD should be £255 as my balance was going to be £847 in debit!

 

You seem knowledgeable, can you explain such extreme swings in forecasting?  Was it because I was one of the many OVO customers who was on a “higher than EPG” fixed rate tariff and was converted wet 1st Oct 2022 to a variable tariff when the EPG kicked in?

 

In any event, I’ve calculated a £255 DD from this month will result in my account being in credit to the tune of £650 by the end of September and so I will not agree to any such increase in my DD.  In the event of OVO trying to unilaterally amend my DD and ignoring my request not to increase it, I shall pull out of the DD arrangement and take the hit on the DD benefits as, like most people right now,  I can’t afford to run with such a large surplus in an energy suppliers bank account.

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Hi @Corgimajor 

Clearly up to you, i would personally call collections and ask them to freeze your DD for 3 months if that happens. We help customers on the forum every week that way. Here is one i did today. 

0800 0699 831

Again if your balance gets too high call collections and ask for a refund of your balance. You will never have to run up a large balance. 

Cancelling your DD will put you on a higher unit rate and standing charge. You will end up paying OVO more overall.

I will have a look to see if i can think of any reasons for your increase. We have been helping this person who had an issue that suddenly went away automatically so keep an eye on yours for a few days.

 

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Hi @Jeffus, I contacted collections and I received some useful information, mainly related to additional cost of cancelling my DD and reverting to Pay On Demand.  I figured it would cost me £70 extra at the increased POD tariff until end of Sept.  I also got clarity on the credit refund, which I figure is always going to be a negotiation with collection staff all the while you remain on DD terms as it is always going to be a bit chicken and egg once your credit balance gets close to your monthly payment.  In the meantime  a conversation with a customer support rep has resulted in a request for a DD change exemption based on a payment of £200 per month - which didn't seem unreasonable.  These only last for 3-4 months,  but long enough for me to look at my supply options going forward.  I'm still awaiting email confirmation that my request for a DD Change Exemption has been approved.  If I don't then I will cancel my DD more out of frustration with OVOs DD algorithm parameters than anything else.  This 12 month "look ahead" is dressed up by OVO as a way to assist its  customers manage their energy bill, but the reality is it is clearly used to  take from those customers that can afford it to cushion the cash flow impacts on OVOs balance sheet from those who can't.  I wouldn't mind this so much if I hadn't learnt from looking at OVO's Web home page today that OVO are offering £50 credit for any new customers that sign on.  I guess existing customer over-payments can only assist OVO with further managing their cashflow while they dangle this £50 carrot to new customers.  Which, by the way, is in my view a cynical way of getting around the changes to consumer regulations last year aimed at stopping service companies using higher payments from loyal customers pay for lower introductory offers to new customers.  Something that consumer watchdogs will no doubt be highlighting as the practice of "credit payments" for new customers becomes the new marketing tool for unimaginative marketing departments in the UK service industries.

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I obviously don’t know individual circumstances @Corgimajor but my dd experience has been almost a complete opposite. 
When I first joined OVO my dd was suggested to be too low. After a couple of phone conversations, I was able to maintain the level I thought appropriate but I agreed to ‘top-up’ to prevent a deficit on my account. 
Since then - after a full year - it was suggested that I could reduce my dd level, which I have done, but not to the full amount meaning that it’s forecast that I will get to the end of my contract with a reasonable surplus.

I have no knowledge of the calculations behind any of this but it looks to me as if once I’ve been able to ‘show’ my typical usage, it all works out

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Hi @Jeffus, I contacted collections and I received some useful information, mainly related to additional cost of cancelling my DD and reverting to Pay On Demand.  I figured it would cost me £70 extra at the increased POD tariff until end of Sept.  I also got clarity on the credit refund, which I figure is always going to be a negotiation with collection staff all the while you remain on DD terms as it is always going to be a bit chicken and egg once your credit balance gets close to your monthly payment.  In the meantime  a conversation with a customer support rep has resulted in a request for a DD change exemption based on a payment of £200 per month - which didn't seem unreasonable.  These only last for 3-4 months,  but long enough for me to look at my supply options going forward.  I'm still awaiting email confirmation that my request for a DD Change Exemption has been approved.  If I don't then I will cancel my DD more out of frustration with OVOs DD algorithm parameters than anything else.  This 12 month "look ahead" is dressed up by OVO as a way to assist its  customers manage their energy bill, but the reality is it is clearly used to  take from those customers that can afford it to cushion the cash flow impacts on OVOs balance sheet from those who can't.  I wouldn't mind this so much if I hadn't learnt from looking at OVO's Web home page today that OVO are offering £50 credit for any new customers that sign on.  I guess existing customer over-payments can only assist OVO with further managing their cashflow while they dangle this £50 carrot to new customers.  Which, by the way, is in my view a cynical way of getting around the changes to consumer regulations last year aimed at stopping service companies using higher payments from loyal customers pay for lower introductory offers to new customers.  Something that consumer watchdogs will no doubt be highlighting as the practice of "credit payments" for new customers becomes the new marketing tool for unimaginative marketing departments in the UK service industries.

Hi @Corgimajor although Collections only freeze DDs for 3 months, you can then phone them again and ask for up to another 3 month freeze at the end of the first three month freeze. We have helped other customers by recommending this.

Do keep an eye out in the 3 month period in case the DD reverts early. 

The extra costs that can be charged for  non DD customers are set by OFGEM on standard variable plans. 

Although you can cancel a DD on the variable plan, cancelling a DD on an OVO fixed rate means you loose the fixed rate deal. If you switch to another supplier check the terms of any deal you sign up to to see if you have to pay by DD and the terms of the DDs. 

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Hi @Jeffus, thanks, I understand all this.  What I don't understand is how a business can drive DD payments via "Pay On Demand" premiums of ca 5% based on a 12 month forecast of demand usage for a customer on a 1 month rolling variable agreement. 

Oh, hang on,  yes I do, competition in the domestic energy market has vanished. 

Well let's hope OVO recognise what goes around comes around and there is likely to be an increasing number of customers like me who don't like being taken for cashcows and the first opportunity we get we will be looking for a company that has the same attitude to customer satisfaction that OVO did 5 years ago.

 

 

 

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Hi @Jeffus, thanks, I understand all this.  What I don't understand is how a business can drive DD payments via "Pay On Demand" premiums of ca 5% based on a 12 month forecast of demand usage for a customer on a 1 month rolling variable agreement. 

Oh, hang on,  yes I do, competition in the domestic energy market has vanished. 

Well let's hope OVO recognise what goes around comes around and there is likely to be an increasing number of customers like me who don't like being taken for cashcows and the first opportunity we get we will be looking for a company that has the same attitude to customer satisfaction that OVO did 5 years ago.

 

 

 

OVO estimate what you will use over the next 12 months by looking at what you have used over longer than 12 months. This isn't unusual, the industry standard Estimated Annual Consumption does this as well. This helps smooth out any anomalies due to weather, holidays etc for the majority of customers. There will always be some people the Future Annual Consumption is a bit high or a bit low in practice. Ironically much of the OFGEM fine OVO got a few years ago was for underestimating peoples DDs resulting in large debit balances. 

The biggest issue with the Future Annual Consumption has been for a few of the people who transferred from SSE who had a  widely high  figures for a variety of reasons.

I am sure you would prefer a supplier that used a different approach to OVO. When you find one you prefer, if you could post details on the forum that would be really helpful for some customers i am sure. Then we can sign post your posts and reasons for choosing the new supplier. 

The terms of new fixed rates that i think we will see from all suppliers shortly will be interesting to compare. 

 

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Hi @Jeffus, I think I prefer Octopus Energy based on Which customer service ratings (78% vs. OVO’s 63%).  Currently and unsurprisingly there is a mere £5 difference between 10 UK energy suppliers on an annual switch search for my energy usage (ca £3,000 pa) at my address, but like you say when new Fixed Price deals enter the market then we may see some competition emerge.  I was told on Saturday (by the OVO rep I spoke to about my DD exemption) to look out for some from OVO from this Monday, but none have yet appeared.

Out of interest when you say “Then we can sign post your posts and reasons for choosing the new supplier.”who do you mean by “we”  in that sentence?  Are you a member of a specific response group/collective on this forum?  

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Hi @Jeffus, I think I prefer Octopus Energy based on Which customer service ratings (78% vs. OVO’s 63%).  Currently and unsurprisingly there is a mere £5 difference between 10 UK energy suppliers on an annual switch search for my energy usage (ca £3,000 pa) at my address, but like you say when new Fixed Price deals enter the market then we may see some competition emerge.  I was told on Saturday (by the OVO rep I spoke to about my DD exemption) to look out for some from OVO from this Monday, but none have yet appeared.

Out of interest when you say “Then we can sign post your posts and reasons for choosing the new supplier.”who do you mean by “we”  in that sentence?  Are you a member of a specific response group/collective on this forum?  

Fair question, there are a few posters including me that regularly post and signpost useful information on other suppliers, some are OVO customers, some  are customers of other suppliers including Octopus. 

For example i regularly signpost Octopus for their export tariff options, their Outgoing tariff is great compared to everyone else currently. 

https://octopus.energy/outgoing/

Only people with _OVO actually work for OVO.

It can be useful to signpost real recent examples, both good and bad.

Most forum work well when a cohort of posters keep things ticking over. Luckily there a few people on this forum that do that. 

On the flip side, for many EV owners the OVO EV tariff add on is probably cheaper than the Octopus alternatives at the moment. 

Userlevel 7

Hey @Corgimajor,

 

I’m glad to hear Support are putting your account on a three month hold. I just wanted to add, if you feel your direct debit calculation is too high, it’s worth making sure your Estimated Annual Consumption is accurate:

 

 

Your direct debit review will be based on this figure so it’s important that it’s correct.

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