Millions of families across the nation are owed money by their energy suppliers as a result of excessive direct debits. But is it a good idea to claim the money back?
One of the inevitable side effects of the fact that we are all spending so much more time at home currently is that our energy use is going up.
It doesn’t matter that the sun is out ‒ while we might not be sticking the heating on as much, we are nonetheless using more energy throughout the day than we might if we were working as normal, whether that’s because we are doing more cooking or spending longer on the laptop.
And while that will inevitably lead to larger bills down the line, it’s worth noting that a massive 13 million households are currently owed money by their energy supplier.
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Who owes whom?
A new study by price comparison site Uswitch has found that around 13 million households are owed a whopping £1.7 billion in total by their energy suppliers.
That works out at almost half of the homes in the UK (46%) having overpaid for their energy use.
And these aren’t small sums we’re talking about. On average households are entitled to reclaim £136 each, though one in 10 of those homes owed cash could claim a rebate in excess of £200.
It goes both ways though, with almost four million households in debt to their energy supplier. On average they owe around £142 each.
So why are so many households either owed money or in debt to their energy supplier? And if you’re owed cash, how do you go about claiming it?
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Ups and downs
With some household bills, the size of your bill varies on a month-by-month basis depending on how much you’ve made use of that particular service.
For example, if I make a load of calls at peak times on my home phone my bill next month will be significantly higher than usual.
That’s not quite how things work with energy bills though. If it was, we would all have large bills to pay throughout the winter, when the heating is constantly on, and smaller bills during the summer months.
Instead, suppliers work out how much you are likely to use over the year ‒ and therefore what your bill will be ‒ and then divide that sum by 12.
It means you get a stable direct debit over the year, but because it is essentially guesswork there is plenty of potential for that estimate to be grossly wrong.
As a result, at the end of the year, an awful lot of people are either owed money by their supplier ‒ or in debt to them.
How to reclaim
The good news is that you can get that money back, though inevitably the process for doing so varies sharply between different suppliers (read more about how refunds work here).
Some suppliers will do so automatically once they register that you are in credit by a certain amount. Scottish Power, for example, conducts an annual review, and if it finds that you are in credit by more than £75, the balance is handed back to you automatically.
Meanwhile, at Npower, you only need to be in credit by £25 at the point of that annual review for the cash to be returned.
Importantly in both cases, your bills need to be based on actual meter readings.
With other suppliers, you have to actually request a refund, though many point out that if your account is significantly in credit they will suggest lowering your direct debit.
The truth is that with the uncertainty surrounding our finances currently, the option of getting back more than £100 that is by rights yours will no doubt be tempting for plenty of people.
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Consider leaving it where it is
However, there is an argument that it might be better to leave that money alone, at least for a while.
As we are using more energy than usual at the moment, it’s likely that more people will find their monthly direct debits do not actually measure up with their usage.
By leaving that surplus cash in your account, to effectively top up your monthly payments, you can ensure that you don’t end up in debt to your supplier.
A better way to save some cash from your energy may be to shop around for a new tariff, particularly if you’ve moved onto your lender’s standard tariff, which is always their most expensive deal on offer.
What’s more, the fixed deals you can choose from now are at some of their most competitive levels in years, with data from MoneySuperMarket revealing that there are currently a whopping 138 tariffs which work out cheaper than the energy price cap, which now stands at £1,162.
These aren’t small differences either, with the best value tariff on the market a whopping £412 less than that cap.
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