CASH BACK
Martin Lewis urgent warning over energy bill ‘rip-off’ and you could be owed £100s back – why May is the ‘perfect time’
Plus, we've explained how to check and challenge your bill
MARTIN Lewis has issued an urgent warning for millions of energy customers who could be owed £100s back in refunds.
In a new blog post on MoneySavingExpert.com, Martin explained how it's the perfect time to request credit refunds.
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Martin said: "Energy firms are said to be sitting on over £3billion of our cash, building up this huge reservoir from the two-thirds of homes who pay by monthly direct debit.
"Yet right now, May is the perfect time to stop the rip-off and get that money back – it's all about understanding the direct debit cycle."
But he said that households shouldn't assume that if they're in credit, they're owed cash.
This is because the way monthly direct debits are set is more complicated than this.
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Typically, your energy company will work out the cost of your energy for the year ahead and divide this into 12 equal payments.
However, to smooth things out over the period and avoid high bill shocks in the winter, customers are more likely to build up credit during the warmer summer months.
In his blog, Martin Lewis wrote: "Monthly direct debits are based on an estimate of usage.
"If the estimates are wrong, which is common, they can leave some unnecessarily overpaying with too much credit or others getting into too much debt."
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So customers who have a high amount of credit right now would be right to query this and ask for a refund, according to the founder of MoneySavingExpert.com.
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THE DIRECT DEBIT CYCLE
As an example, Martin previously explained how the direct debit cycle works for those with a zero balance on January 1 each year.
Martin Lewis said on Good Morning Britain: "At this point, you'll be on £0 worth of credit from January.
"But as you go through the months, you'll start to build up your debt until you get to May, when you'll start to pay off that debt and move into credit.
"This peaks in November before it starts to go down again. So why is this week important?
"Well, because this is the time of the year when you should have the least amount of credit.
"Exactly how much you'll have depends on when you started with your energy firm - but effectively, there's no reason to be in credit right now because this is the lowest point in the cycle."
However, it's important to note that if you started the cycle at a different point, you might not have any energy credits across the 12 months.
But effectively, Martin said that there is no reason for anyone to be in credit right now.
"If you're two or three months in credit right now, that's too much," he said.
How do energy direct debits work?
THERE are two main types of energy direct debits - fixed and variable.
Most energy customers pay a fixed direct debit, which means you pay a fixed amount every month.
Your energy company will work out the cost of your energy for the year ahead and divide this into equal payments.
Most energy firms will use the average amount of gas and electricity used in previous years to calculate your monthly instalments.
With a fixed direct debit you can spread the cost of your energy use without any surprises.
If your energy supplier has upped your fixed direct debit amount even though your usage is down, you can request that the fixed monthly charge is brought down - we've explained how to challenge your bill below.
Those on fixed direct debits are more likely to build up credit during the warmer summer months and if you're in credit but your direct debit has risen substantially this winter it's worth challenging it.
Some energy companies give customers the option to pay with a variable direct debit.
With a variable direct debit, you can choose to pay a varying amount every month or every quarter, depending on the energy you use.
You’ll pay for the energy you use, this means you'll likely pay more in the winter and less in the summer.
Some experts argue that this type of direct debit method makes it harder for households to budget in the colder months but if you only want to pay for what you use each month then a variable direct debit may be a safe bet.
So, if you have a lot of credit now, you can request to get your cash back - we've explained how below.
REQUEST A CREDIT REFUND
First, make sure your energy firm has the most up-to-date meter reading.
If your reading doesn't match the energy use they have down for you, chances are they'll want to update your monthly bills as you may not be paying the right amount anyway.
But if your meter readings are up-to-date and f you've been in credit for more than one month ask your energy firm to return the funds.
Each energy supplier has its own process for customers wishing to get a credit refund.
For example, British Gas rules state that it will always hold a £75 energy credit on live accounts.
The supplier will only refund you if there's £5 or more left over after it's put a £75 credit towards your bill.
Customers can request a refund by logging into their online account.
Ovo Energy customers can request a refund if their credit is at least £25 higher than one month's direct debit.
After submitting a meter reading to your online account, customers should head to the payments page and click apply for a refund.
Check with your energy provider to find out how to request your money back.
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We've previously explained the rules for each energy supplier - so check exactly how you can request a refund.
If your supplier won't offer a refund or you think that your direct debit is set too high, you can also challenge your bill.
How can I challenge my bill?
BEFORE you dispute your bill it's worth using an energy calculator to work out exactly how much your usage costs on paper.
You also need to be aware of your rights.
If you pay by direct debit, then this monthly amount should be "fair and reasonable".
If you don't think it is, you can complain to the company in the first instance.
If you're not happy with the outcome you can take it to the independent to dispute, but there are a few steps before you get to that stage.
Your supplier must clearly explain why it's chosen that amount for your direct debit.
If you've got credit on your account, you have every right to get it back - although some experts recommend keeping it there through the summer, so your bills don't go up in the winter when you use more energy.
Your supplier must refund you or explain exactly why not otherwise and the regulator, Ofgem, can fine suppliers if they don't.
If you are disputing a bill, taking a meter reading is a must.
That way the company can't rely on estimates, which may lead to you being overcharged - a reading leaves no room for error either, as it shows precisely what you actually used.
If it's lower than your estimate, you can ask your provider to lower your monthly direct debit to a more suitable amount.
If you find you're always in credit, you should request the direct debit be lowered to reflect your actual annual usage and meter readings.
But beware that you don’t end up in debt later on with a bigger catch-up bill at the end of the year from underpayments racking up.
If you don't have success in negotiating a lower payment then you can put in a complaint.
You can usually get in touch with your provider by email, letter or telephone, but keep a record of contact that you make so you can reference it later if need be.
Charities like Citizens Advice have template complaint letters you can use to help with the process.
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