OVO have sent an email about my Direct Debit - Why are you increasing my monthly payment when I’m already in credit?

Hi @MBT ,

Welcome to the forum! :)

I think I know what this is. It’s worth mentioning that with a Fixed Rate Tariff, only the tariff rates are fixed, not your monthly payments. If you’re using more or less energy than predicted when the quote was generated, your payments may need to be adjusted to help keep on top of the bills. OVO tries to play fair though, and any payment increases are intended only to help make sure you finish the current contract with a balance just above zero. This will only happen if OVO’s billing platform predicts you’ll be in debit at that point, so it attempts to prevent that.

This isn’t unique to OVO. All suppliers have a similar arrangement in place for fixed rate tariffs. Ultimately however, if you don’t end up using all the credit, it simply stays on the account until you do use it up or request a refund. I normally recommend letting it build up though, unless you’re building up way too much spare credit.

I also have had an email, saying my DD will be increased.

Which I found odd, as I have 21 months to go on our fixed rate deal.

I do not understand the reply from Blastoise,: If I keep consumption about the same as previous years, with my current payment (which is already £10/m over what Ovo say is the minimum), I will have over £200 credit by the end of the plan. With the proposed increase, it will be over £450, which is excessive!

I accept that if my consumption increases, my payments also should.

I also accept that at the end of the plan, it seems likely that the next plan will be considerably more expensive, but I want to deal with that at the time, not now.

So, why are Ovo increasing my DD?

I have had a similar experience and conversation with customer service.

My fixed rate deal expires in March 2022.  I know that the price will go up significantly at that point whoever is my supplier.

Currently Ovo estimate, via their DD tool, that I only need to pay £175pm to cover my expenditure until March 2022.  (They are wrong as it has been a unusually warm autumn and I haven’t switch the underfloor heating on yet.)  Even so they have upped the DD to £225 i.e. £50pm more than they think I need to pay!

Effectively they are demanding that I bank with them.  That’s arrogant!  As my credit balance is already £400+, the rate of return on the money is 3% and more than I would get elsewhere but that is not the point.

I would have adjusted the DD down myself but previously (a few months ago) it had been impossible to set it at a level lower than OVO recommended so I expected not to be able to do that but now you can, apparently.

This does strike me as an attempt by Ovo to improve their cash flow. Of course that is pure speculation on my part. (I was unaware of it, but Tim_OVO recently reminded us that the interest on credit balances is no longer available for new customers.)

Perhaps they need to update the terms on the website then

https://www.ovoenergy.com/terms/interest-rewards

Keep an eye on the DD though.  When I called Customer Service yesterday morning they and complained they altered the DD to £200 and sent me a confirmation email.  That didn’t stop me from receiving anther email at 5pm that day saying the DD was £225!

Surprise, surprise this morning the DD was showing as £225 again. 

Having changed it back to £200 this morning and got a confirmation email I wait with baited breath to see if it is put back up for a third time!

Not so long ago, Ovo's way of estimating direct debits could easily get confused in the other direction. I found that after a few months of making an ad hoc payment a few days before each monthly statement was drawn up, it would let me reduce the direct debit amount to peanuts. I kept in control, rather than it, and I was able to set my direct debit at a constant level that should take me through winter with a positive balance that would fall to about zero at just the right moment in spring, when monthly consumption is (only) just covered by that fixed monthly amount that corresponds to my annual consumption. That's when I planned to set the direct debit to that level.

(I have enough data that I know how my consumption varies across the seasons, near enough.)

Then, earlier this autumn, I realised that it was no longer obvious that I'd renew my contract with Ovo when the time came. So I gave myself the widest range of options, and cut the direct debit to the minimum, £5 per month.

My credit balance is plummeting fast, but will still be positive when renewal time comes. (But it won't be anywhere near big enough to take me through winter the way it would otherwise have been.)

If Ovo read this long and rambling post, it might just help them realise their direct debit estimating algorithm is truly broken.

It angers the customers who suffer unreasonably high minimum DD levels.

But it also lets someone (me) who stumbles across its weaknesses, exploit them to the full.

But understand, please - I've had a healthy credit balance all the way through. It's just that I remained in control of my direct debit amount, rather than Ovo, and I made extra ad hoc payments that led Ovo's algorithm into offering me a £5 per month minimum DD. I accepted the offer.

I am aware that I am fortunate to be able to stay slightly ahead with my bill payments in this way. But because Ovo (used to) pay interest on a credit balance, this was a rational choice to make.

Hi everyone, 

I wanted to send a quick reminder of how Direct Debits work, to go along with our guide here:

The aim of that minimum Direct Debit is to keep you out of the red by your contract end date. It looks at how much energy we predict you’ll use, and your credit balance, and your contract end date. 

This would make sense, @Simon1D. If you’re making payments, building up credit, and moving towards your contract end date, I’d expect to see that minimum Direct Debit amount figure drop way down. Of course there may be something else at play with your account that we don’t know about. 

In general though making payments is a great way to ensure you’re account balance is healthy and you keep your Direct Debit options open. 

Hi Tim - when Ovo's algorithm made the offer it did, it seemed to me that it was making a calculation which was taking for granted that my ad hoc payments would continue at the same rate.

Roughly speaking, I suspected the algorithm was offsetting my extra payments against consumption, rather than treating them as the payments they were. In that case, the tiny direct debit amount is mistakenly thought to cover all of my consumption rather than only the part which had, up till then, not been covered by those ad hoc payments.

I think there is a thread on here somewhere, in which I once tried to explain how to forecast balance over the rest of the contract, and making a clear distinction between the effect of payments and the effect of consumption turns out to be key. (I included some examples of what I used to do in Excel, and @Transparent and I had slightly different ways of doing things).

But in summary, I stick to my assertion that the DD estimator is broken, and for some customers the errors are in the opposite direction to the way it benefited me, and painfully obvious (to the customers if not to Ovo's algorithm).