Energy firms holding £8.1bn of customers' money

Dan Malcolm said it took six weeks to get £800 refunded by his energy supplier

Energy firms held a combined £8.1bn of customers' bill overpayments at the start of 2023, new Ofgem figures show.

Many households pay a set monthly amount, building up credit in the summer to cover higher winter bills.

Companies can hold onto those overpayments, but MP Angus MacNeil accused them of holding "too much money" and "sitting on a nest egg".

Industry group Energy UK said direct debits were based on forecasts made when unit prices were volatile.

Customers can request refunds, it added.

The system is designed so customers have higher amounts of credit in September and October heading into the winter, but it should balance out close to zero in April and May heading into the summer.

Energy regulator Ofgem said that "customers have the right to request their balance back at any time and be refunded in a timely fashion".

But one customer, Dan Malcolm, told the BBC it took six weeks and hours spent on multiple phone calls to get just some of his money back.

The father-of-three from Dunfermline unknowingly built up £1,100 of credit with his supplier in September 2022.

"It was £800 I wanted back and I thought that was fair and they made me jump through hoops to get it - it's disgusting," he said.

"It was so, so frustrating. Energy companies saying, 'it's your money, you can get it back when you want' - it's lies."

MP Angus MacNeil, who chairs Parliament's energy security and net zero committee, said Mr Malcolm's story was "very concerning indeed".

"Something is very wrong," he said. "If this is writ large across consumers across the UK then energy companies have a tidy wee nest egg sitting there with customers' money."

Energy companies holding on to people's money can be a good thing, explained Ellen Fraser, an energy consultant and partner at management consultancy Baringa.

"You keep your payments flat in the summer when your actual bills are smaller and intentionally build up credit on your account," she said.

"You then spend that credit in the winter when your bills are bigger but you stay paying the same monthly amount which helps smooth out your bills, especially over Christmas which is an expensive time of year," she said.

But she would expect a household's credit balance to be at, or at least close to zero, around what the industry calls "the end of usage season" in April or May.

Ofgem's figure of £8.1bn in customers' accounts between January and March this year suggested people were "either not aware of a large credit balance, or aren't being successful in their requests for refunds", said Ms Fraser.

"Neither position is good for customers nor acceptable from suppliers," she added.

Energy UK, which represents firms, said suppliers were obliged to set direct debits that are, over a 12-month period, estimated to result in a balanced account.

"These forecasts are based on estimated usage and expectations of future prices. At the time [Q1 2023] prices were extremely uncertain and the level of government support was unknown," a statement said.

Ofgem said in a statement: "Earlier this year, we strengthened rules regarding direct debits, which should prevent excessive accumulation of consumer credit balances. Suppliers should be basing their direct debits on the most accurate available information."

The watchdog was unable to tell the BBC how much of the £8.1bn held in credit was from households and how much was from businesses, although it said it expected the majority was from households.

It said if customers were not happy with how they were treated by their energy supplier or the problem was not fixed in eight weeks, they could complain to the Energy Ombudsman.

Energy is regulated differently in Northern Ireland where the Northern Ireland Authority for Utility Regulation (NIAUR), an independent public body, oversees the electricity, gas, and water and sewerage industries.

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