Quirks in the way our energy bills are calculated means that it’s easy to be overcharged on them. Whilst this usually evens out over the course of a year, it can expose you to the risk of losing that money if you decide to switch energy providers.
Switching is one of the best ways of saving money on your energy bills, but this pitfall means you can lose money on account of the credit not being returned to you upon closure.
It’s a pretty big problem, with the energy regulator OFGEM cracking down in 2014 and ensuring that £670 million of overpaid payments were returned to customers by the end of 2016. However there’s still £97 million in unpaid payments from customers over-charged since 2014, so is some of that sum yours?
How can you overpay on your energy bills?
This is down to the way bills are calculated, which are based on your estimated usage across a year. You’re usually charged a flat fee every month for your energy which is a twelfth of your expected annual cost. Which seems fair, right?
Well, the problem is that you naturally use a lot more energy during the winter. How much depends on your individual circumstances of course, but central heating costs are very rarely as expensive in June as they are in January.
This means that when you start your billing cycle is hugely important. If it’s towards the start of the colder season, then the chances are you will owe money to your supplier as you will have been paying a lower average amount during your high usage period in the winter months. As you use less in the summer, this will then even itself out.
If it’s the other way round, your account could be in credit for the bulk of the year, as you will be paying more in the summer based on a higher winter usage. In both cases, your spending should gradually bring your balance back into line again over the following months as your monthly payments are adjusted accordingly. But if you switch providers before that happens, then you could owe, or be owed, an extra amount.
This can also be magnified by the split of gas and electricity within your home as well. It’s perfectly plausible that someone who only uses gas for heating and water from their taps would use significantly less in the warmer months, with as much as 70% of the gas usage being concentrated in a period as short as three to four months.
And it’s an estimate as well. This is usually calculated by analysing factors like how many people live in the house, the number of rooms, previous heating costs and so on, to come up with your expected usage. The reality could be you use more, or less, than the amount calculated. This would mean your bill is wrong and you could end up with available credit or a balance to pay.
Surely if the account isn’t right when I leave, the money is returned?
You’d think so, and whilst it’s very unlikely energy providers will let you off any money you owe them, they’ve been doing what Money Saving Expert has described as a “don’t ask, don’t get” policy. OFGEM did force more suppliers to cough up, but there’s still plenty of people owed money.
As switching providers is often a result of changing address, that was often used as an excuse for suppliers not contacting to settle the arrears. There’s also cases of account holders dying and the money then not being returned.
It’s even happened when you’ve not switched, with some providers not automatically refunding money when your annual cycle ends (the ‘big six’ energy providers all do this now as standard, since OFGEM’s intervention). Although it will usually be at least taken off your next energy bill, in much the same way as any underpayments can be added to your next tariff, it’s important to check to see if this has happened.
How do I know if I’ve been overcharged?
Have you got any old bills lying around? If you know your supplier and account number you can contact them direct and go through the process over the phone. If you can’t find any, check old bank statements for direct debits as this will let you know who you’ve paid out bills to.
If you’re still unsure, check with family members or former housemates, or as a last resort your current provider might be able to check the database for you based on your address. Ringing your current provider just to check is always good practice too, because they may have overcharged you and not alerted you.
Is a phone call all it takes?
Usually, just a call will get you an answer and then a resolution. You should avoid busy times to do this (stick to during standard office hours), so you lower the chances of you being put on hold for a long time. Here are some details for some of the main energy firms:
British Gas (also includes Sainsbury's Energy) - 0800 048 0202 (free from landlines)
You may be asked to write to them to provide further details, which will almost certainly be the case if you’re applying for a deceased member of your family. The provider will give you full details of what to do in this instance.
What if they won’t pay me back?
If you’ve been informed by a supplier about the overcharging they should refund you pretty swiftly, either by paying into your account or sending you a cheque.
In the rare cases that they don’t, if you are still waiting for a resolution after eight weeks you can contact the energy ombudsman who will take up the query on your behalf.
Disclaimer: All information and links are correct at the time of publishing.