Help with energy bills: I'm a consumer expert - here's 6 tips on how to stop energy firms hoarding your cash

British households are missing out on over £12 million in interest each month due to energy suppliers holding onto billions in customer credit balances.

Data from Ofgem recently revealed that energy companies held £3.7 billion from customers in credit last year. As a result, energy customers across the UK lost about £148 million in potential interest in 2023.

The average household with a balance in credit had £252 in their account, which could have earned £10.08 in interest if deposited in a bank.

Campaigners and money experts are now encouraging households to reclaim credit balances from their energy suppliers to "reset" direct debit payments, which remain high despite falling prices.

(Photo: DANIEL LEAL/AFP via Getty Images) | AFP via Getty Images

The Warm This Winter campaign emphasises that customers should not cancel their direct debits, as this could result in higher unit costs for households. Instead, they recommend resetting energy payments in early summer, which is considered the ideal time for adjustments for the upcoming year.

Warm This Winter spokeswoman Fiona Waters said: “Energy companies are sitting on over £3 billion of bill payers’ money whilst providing an appalling service in many cases and making billions in profits.

“The Big Energy Claim Back is a way people who pay by direct debit can issue a wake up call to companies that customers are not prepared to be ripped off anymore and demand energy suppliers provide a fit for purpose service, whether that’s smart meters that actually work, customer service centres that pick up the phone, fair tariffs, an end to extortionate exit fees and just basically doing their job.”

Why do energy companies have my money?

Most customers pay for energy via direct debit, with an average monthly payment of £141. But energy use varies seasonally, leading to credit build-up in summer and depletion in winter.

Essentially, this means that customers can find themselves overpaying for energy they haven’t used in the summer, putting their account in credit.

In theory, this extra cash is then balanced out when more energy is used as the temperatures drop towards the end of the year.

But while it all usually works out in the end, it does mean customers can have funds sitting in their energy accounts which could be put to better use in the here and now.

Warm This Winter estimates that in 2023 alone, energy firms likely earned at least £159 million in bank interest from these customer credit balances. This is interest that you could be earning from your own money instead.

Martin Lewis, founder and chairman of MoneySavingExpert.com, recently pointed out that while it is sensible to build up credit in the summer months to pay for higher energy use in the winter, early summer is the perfect time to stop the “rip off” of firms sitting on billions of pounds of customer credit.

How to stop energy firms hoarding you money

Greg Marsh, consumer champion and CEO of AI household money-saver Nous.co, shared the following tips to stop energy firms hoarding your money:

Don’t have more than two thirds of your monthly bill in credit right now

Greg says if your credit balance in May was more than two thirds what you pay each month, “you should ask for a refund from your supplier.

“If you’re considerably above that level your direct debit level is likely to be set too high and you should ask your supplier to reduce it.”

May is the perfect time to ask for a refund

The majority of households pay energy bills by direct debit and are charged the same amount every month. As a result, most of us build credit in the summer and use it up in the winter when our usage is higher.

Greg says May is the perfect time to ask for a refund each year, but if you didn't apply then you'll likely still have minimum credit. "You’ll have used up the balance over the winter and be about to start building it up again," he said. "So if you’ve built up credit now’s the perfect time to get back any money you’re owed."

Submit regular meter readings

“If you don’t have a working smart meter, make sure you send regular meter readings to your supplier. This means they’ll have accurate information about how much energy you use at different times of the year.

“Failing to do so means your supplier will estimate your usage, which could leave you in too much credit – or in debt.“

Don’t ditch the direct debit

“If you think your direct debit is too high don’t ditch it entirely – it’s the cheapest way to pay for energy. Customers who pay by standard credit – cash or cheque – currently pay an average of £106 per year more than direct debit customers.”

Beware poor value fixed energy deals

“Fixed energy deals have started to return to the market – but most don’t offer good value. A fix that looks cheap compared to what you're paying now could easily end up costing you more over the next year.

“Wholesale energy prices are still volatile and may fall further. Unless you really value certainty, fix too soon and you could end up stuck in an expensive contract.”

Most households can save without fixing

“Most households are out of contract right now and can save by switching providers with Nous. The majority can save the better part of £150 on their energy bills, without having to commit to a fixed deal.”

How can I claim back credit from my energy supplier?

The process varies from company to company but a guide to find out how to claim back credit from the major suppliers is available on the Warm This Winter website: warmthiswinter.org.uk/big-energy-credit-claim-back.

Before you take action, check that you are able to afford to pay more on monthly bills as energy firms may increase your direct debit if you withdraw your credit.

If your energy firm refuses to refund your credit, you can take up a case against them with the Energy Ombudsman: energyombudsman.org