Energy regulator Ofgem announce their proposal to limit how much consumer credit a supplier can hold which could potentially return £1.4 Billion to fixed direct debit bill payers in an automatic rollout from 2022.

As part of the wider supplier licensing reviews, Ofgem has proposed new standards to suppliers and their customer services. The proposal would mean that there would be an industry limit to how much customer credit a supplier can build up and hold.

Customer credit affects fixed direct debit customers as they pay the same price for their energy each month which is based on their estimated consumption. The customer builds credit when their consumption is low, typically in warmer periods, as they will be overpaying for their consumption. This credit is then used when their consumption is high, typically in colder periods, to make the difference in cost.

A consumer’s credit balance should be at £0 a year from when they started paying to ensure they have not overpaid. However, Ofgem research, conducted in 2018, found that credit balances had been built up across suppliers, resulting in £1.4 billion worth of excess customer credit or £65 on average per household supply.

This has resulted in the proposal to limit how much customer credit a supplier can hold and this will resolve concerns around suppliers using the credit to fund bad business practices. This will be rolled out in an ‘auto refund’ policy that will commence from 2022 so that affected customers will seamlessly receive their overpaid credit.

Chief executive at Ofgem, Jonathan Brearly, said:

“These new proposals would ensure that suppliers are not holding onto more of customers’ money than absolutely necessary, potentially returning millions of pounds of customers’ money.”

The ‘auto refund’ policy would stop any further build-up of consumer credit by ensuring balances are not above £0 on their payment anniversary from their contract start date. This will reduce costs for fixed direct debit payers and build more confidence in the market.