Banking

Households could be tempted to take credit from energy supplier in case of failure

Households may be tempted to pull any credit they have with their energy supplier in the wake of the industry crisis.

Millions of customers are likely to have built up substantial credit balances over the summer period, where they have used less energy. 

Earlier in the year, Ofgem estimated £1.4billion of credit was sitting with energy suppliers.

As providers have started to cease trading, thanks to the meteoric rise of wholesale costs, many could start taking money they have built up with their own supplier, just in case it too goes bust.

Crisis: Some consumers could be tempted to pull credit from their energy supplier now

However, normally at this time of year credit balances are built up for the winter period with consumers setting up a direct debit each month to balance out energy use over the year.

Therefore, if consumers decided to take out all of their credit now, they could find themselves paying more monthly for the energy used over the winter – or even end up in debt.

This is Money takes a look at the pros – and cons – of pulling your credit now.  

What is credit?

If you pay your energy bill by direct debit, you could end up being ‘in credit’ with your supplier – meaning they owe you money.

The amount you pay each month is an estimate based on how much energy your supplier thinks you will use over the whole year and sometimes you will have used less energy than you paid for.

This is likely to happen over the summer months with many consumers saving up their credit for the winter months when their bill tends to be larger.

Why would people take out credit now?

Many may be thinking of taking credit out now if they are concerned about their energy supplier going bust – with many going to the wall in recent weeks.  

In this scenario, credits are protected by the energy regulator, under its supplier of last resort scheme.

But consumers may be worried there will be a delay due to the ongoing crisis – or concerned they may not get the full amount. 

Others may feel they could benefit from having the money in their bank accounts if they are in – or predicted to be in – financial difficulty.  

Many may be thinking of taking credit out if they are concerned about their supplier going bust

Many may be thinking of taking credit out if they are concerned about their supplier going bust

What should you do? 

It is entirely up to consumers what they do with Ofgem advising that if any customers are concerned about the size of their balance, they can ask their energy supplier to refund it.

Suppliers must do so promptly, unless there are reasonable grounds not to and they must explain to the customer why. 

However, those who take out their credit now could face larger bills in the winter when they will not have a buffer in place.

They could also find themselves in debt, if they are unable to make the energy payments over the next few months.  

For those moving from fixed tariffs in the coming weeks, bills will also likely be more expensive due to the industry crisis hiking prices across the board.

Once placed on a new tariff with the new supplier, it is likely bills could rise by hundreds of pounds. 

Tashema Jackson, of Energy Helpline, said: ‘Over the last few months most households will have built up a credit balance on their energy accounts, as homes typically use less energy during summer, but direct debits are split equally across the year.

‘However, while you may have used less energy recently, the coming winter is always a time of higher usage, as we spend more time in doors and crank up the heating.

‘If you decide to get a refund on your credit balance, make sure you have enough left over to cover your next bill, and be prepared to increase your direct debits over the winter to cover any extra energy you do use.

‘Some consumers may be worried about the raft of suppliers which have recently gone out of business, and think they may lose their built up credit. 

‘But any credit you have built up is automatically protected should your provider cease trading and will be transferred to the new supplier.’

How to claim?

Those who decide they want to reclaim credit need to contact their supplier and tell them how much credit they would like returned. 

The suppliers contact details should be on your bill or online account and you will need to give them an up-to-date meter reading.

Your supplier might not give you a refund if they have a good reason, for example, they might not give you a refund if you only have a small amount of credit on your account during summer.

But if your supplier says they won’t give you a refund, they must explain its decision.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

Most Related Links :
todayuknews Governmental News Finance News

Source link

Back to top button
Native News Post