- Many suppliers have collapsed with more hope to follow
- This may prompt some families to pull their existing credit from providers.
- Some may feel that it is safer than leaving it there for the winter period.
Households may be tempted to pull any credit with their energy supplier in the wake of the industry crisis.
Millions of customers are likely to have substantial credit balances during the summer period, where they have used less energy.
Earlier in the year, Offgame estimated that energy suppliers had £1.4 billion in debt.
As providers begin to cease business, thanks to a huge increase in wholesale costs, many may begin to take the money they have created with their own supplier, just in case it even takes off.
Problem: Some consumers may now be tempted to take a loan from their energy supplier
However, a credit balance is typically created for the winter period at this time of year, with consumers setting up a direct debit each month to balance energy use throughout the year.
So, if consumers decide to take out all their credit now, they may find themselves paying more monthly for the energy they use over the winter – or even end up in debt. .
This Money Now takes a look at the pros — and cons — of stretching your credit.
What is credit?
If you pay your energy bill by direct debit, you may eventually ‘credit’ with your supplier – meaning they owe you money.
The amount you pay each month is an estimate based on how much energy your supplier thinks you will use throughout the year and sometimes less energy than you paid for.
This is likely to happen in the summer months as many consumers save their credit for the winter months when their bills get bigger.
Why would people take credit now?
Many people may be thinking about taking credit now if they are concerned about their energy supplier closing down – with many going to the wall in recent weeks.
In this scenario, the credit is protected by the energy regulator, under its supplier of last resort scheme.
But consumers may be worried that the ongoing crisis will cause delays — or worried they may not get the full amount.
Others may find that they can benefit from keeping money in their bank accounts if they are in financial difficulty – or are predicted to be.
Many people may be thinking about taking credit if they are concerned that their supplier is going to collapse.
What should you do?
It is entirely up to consumers what they do with Offgame, advising that if a customer is concerned about the size of their balance, they can ask their energy supplier to refund it. Huh.
Suppliers must do so immediately, unless there are reasonable grounds for doing so and must provide reasons to the customer.
However, those who take their credit now may face large bills in the winter, when they will not have a buffer.
They may also find themselves in debt if they are unable to make energy payments over the next few months.
For those moving beyond fixed tariffs in the coming weeks, bills will also be more expensive due to price hikes across the board due to the industry crisis.
Once a new tariff is placed with the new supplier, it is likely that the bills could rise by hundreds of pounds.
Tashema Jackson of Energy Helpline said: ‘Most homes will have built up a credit balance on their energy accounts over the past few months, as households typically use less energy during the summer, but direct debits are split evenly throughout the year. Huh.
‘However, while you may have used less energy lately, the coming winter is always a time of greater use, as we spend more time in the door and cranking up the heating.
‘If you decide to get a refund on your credit balance, make sure you have enough left over to cover your next bill, and to cover the extra energy you use over the winter. Be prepared to increase direct debit.
‘Some consumers may be concerned about a fleet of suppliers that have recently gone out of business, thinking they may be losing their built-in credit.
‘But any credit you create is automatically protected if your provider ceases business and will be transferred to the new supplier.’
How to make a claim?
Those who decide they want to recover the credit must contact their supplier and tell them how much credit they wish to return.
The supplier contact details must be on your bill or online account and you must give them up-to-date meter readings.
Your supplier may not give you a refund if they have a good reason, for example, they may not give you a refund if you only have a small amount in your account during the summer.
But if your supplier says they won’t give you a refund, they have to make their decision clear.