Martin Lewis explains ‘important’ tips to get hundreds back from energy supplier

Financial journalist Martin Lewis has explained when and how to check if a person is in energy credit and more importantly, how people may be able to get it back.

Collectively, energy firms are sitting on over £6.7billion worth of customers’ credit, according to Uswitch research.

Speaking on his BBC Radio 5Live podcast on Wednesday, he said: “67 percent of you pay energy bills by direct debit and right now, this moment in time, is the perfect time to see if you are in too much credit.”

Describing the issue as “really important”, Mr Lewis explained that for those who pay energy by monthly direct debit, most firms set the rate by taking a household’s annual cost and dividing it by 12, which aims “to smooth things out so you pay the same amount over the year in normal times”.

He continued: “That is a very good idea to help people’s cash flow management. The problem is the implementation, not the concept.”

READ MORE: Energy bills to drop by £437 a year from July, experts say

“What it means is we’re meant to spend part of the year in energy credit, where they’ve got our money, and we’re meant to spend part of the year in energy debt, where we owe them money. That is the energy direct debit cycle.”

Before explaining the next steps to retrieve any credit owed, Mr Lewis pointed out: “You always need to make sure you do a meter reading before you do any of this because if the information’s wrong, you can’t do it properly.”

Delving into the cycle, Mr Lewis said: “For someone with a zero balance on January 1, what starts to happen is, because we’re in winter months, you start to build up debt. And your debt grows and then the curve evens out around now. It’s May. Even though we’re into the spring, this is the point in the year when you stop building up energy debt.

“For someone starting with the zero balance, you’d expect to be just over a month and a half in energy debt. From this point onwards in the year, you start to reduce the energy debt, the curve moves upwards until it zeros out around September and then you’re in maximum credit at the beginning of November. From that point onwards, it drops again.”

However, Mr Lewis pointed out that this depends on where a household is in their own cycle.

He said: “For someone who started [their cycle] at the beginning of May, you’d never be in energy debt, you’d just go into maximum energy credit in November and have nothing in May. For someone who started in November, you would go down and be in maximum debt in the middle of May.

“All of this can be summarised by one simple fact. Right now is the point in the year you should have the least energy credit. Most people should be in maximum energy debt. So if you check your direct debit now, you’d expect to be up to two and a half months in energy debt and the minimum you should have is no credit at all.

“Anyone who checks their balance now and finds they’re in credit, you shouldn’t be. And there is currently up to £7billion in energy credit being held by energy firms – so you can see where I’m going with this.”

Mr Lewis told listeners that if they check their accounts to find that they’re three, four or five months in energy credit, he’d get in touch with the energy supplier to say: “I don’t need that credit, energy costs will likely drop in July, so I’d like you to return some or all of it to me please.”

He added: “I’m not saying it’s always as easy to get them to do it but I have many success stories, but that is the point of the energy direct debit cycle. Right now, today, you shouldn’t have any credit, so if you do, why let them sit on your cash?”

Responding to the question asking why firms sit on the cash and are reluctant to give it back, Mr Lewis said: “Interest rates [were] 4.25 percent, if I had £7billion of someone else’s money, I’d put it in the bank at 4.25 precent, wouldn’t you?”

Providing an example of one energy credit success story he was sent via Twitter, Mr Lewis said “Robert” had over £1,000 credit with his energy supplier. He said that after Robert approached them, he got the money repaid. On top of that, because Robert was paying “far too much in the first six months”, the supplier reduced his direct debit from £265 to £112 per month.

Mr Lewis said: “He sent me that in March, but that is just an idea of the scale of money that we are talking about.”

He added: “Remember always be polite to people in the call centre – they have not done anything wrong and they are just doing their jobs”, before instructing listeners to “make sure to do a meter reading [before contacting] as the energy credit may not be accurate.”

The Martin Lewis Podcast is available to listen to now on BBC Sounds.