How do Direct Debits work?

See how we calculate your Direct Debit amount and why it might change over the course of your contract.

• How do you work out my Direct Debit amount?
• Why do you review my Direct Debit?
• What happens if I use less energy than the Direct Debit amount I’ve chosen?
• Why has my Direct Debit amount changed?
• How did you work out my new Direct Debit amount?
• Why do most of your customers pay in advance by Direct Debit?

How do you work out my Direct Debit amount?

When you join OVO, we work out how much energy we think you’ll use over the year. This is calculated taking into account factors like the size of your home and what you’ve used in the past. Then we divide that cost by 12 to work out your monthly payment. 

Why do you review my Direct Debit?

We review your Direct Debit to make sure you are not paying too much or too little for the energy you’re using.

When we first work out your Direct Debit amount, we calculate a monthly sum to make sure that, when your OVO contract ends, you’ve paid for all the energy you’ve used.

We don’t want your payments to stray too far away from this target. That’s why, as the year passes, we’ll review your Direct Debit regularly, to make sure it’s on track to cover your energy bills – but without building up too much credit.

What happens if I use less energy than the Direct Debit amount I’ve chosen?

If you use less energy than your monthly payment amount, you’ll build up credit on your account. This’ll help to pay for your future energy costs when you use more over the winter – and you’ll also get our 3% OVO Interest Reward (rising to 5% in year 3) on any credit you’ve got.

Why has my Direct Debit amount changed?

We change your Direct Debit if you’re not paying enough cover the energy you’re using – or if you’re using less than we thought you might.

If your Direct Debit goes up, it’s because you haven’t been paying enough to cover the cost of the energy you’re using, and we’re making sure you don’t build up a debit balance. You can help to make sure your Direct Debit’s correct by giving us regular meter readings  – once a month is ideal.

Staying in the black is a good idea for a number of reasons. As well as covering your winter spend, you’ll also have the flexibility to change suppliers. Being in debt to an energy company makes it harder to switch to a cheaper supplier, which means a less competitive energy market and higher bills. So we encourage you to stay on track. 

How did you work out my new Direct Debit amount?

It’ll depend on where you are in your contract, as we use different calculations for the first nine months of your plan, and the last three months.

0-9 months into your plan?

We look at the amount of energy we think you’ll use until the end of your contract, and subtract your current positive balance (if you’re in debt, we add it on). Then we divide the total by the number of Direct Debit payments left.

This gives us your monthly Direct Debit amount (we aim to get your balance to zero by the end of your contract).
Here’s an example of a Direct Debit review in April 2016:

• The plan ends in August, so there are four payments left (May, June, July, August)
• The current balance is £160 in credit 
• The forecasted energy use is £400 (between May and the end of August) 
• We subtract your credit balance from your forecasted energy use: £400 – £160 = £240
• Then divide £240 equally between the four Direct Debit payments, which works out to be £60 a month 

9-12 months into your plan?

We add up the amount of energy we think you’ll use until the end of your contract, and the energy we think you’ll use for the 12 months after your contract. Then we subtract your current balance.

Next, we divide the total by the number of payments you have left (that’s the months left on your current plan, plus 12 more). Our plan is to get your balance to zero by the end of your next contract, if you decide to stay with us. 
Just so you know, if you renew or roll onto Simpler Energy, our variable-rate plan, we’ll review your Direct Debit again as the rates will be different.
Here’s an example of a Direct Debit review in April 2016:

• The plan ends in June, so there are two payments left, plus 12 payments for the following year – that makes 14 Direct Debit payments in total
• The forecasted energy use for May 2016 until the end of June 2016 is £200
• The forecasted energy use for the 12 months after the current contract ends (June 2016 to June 2017) is £1,300
• The current balance is £180 in credit
• We add both the forecasted figures together, then subtract the credit balance: £200 + £1,300 – £180 = £1,320
• Then divide £1,320 equally between the 14 Direct Debit payments, which works out to be £94 a month  
  

Why do most of your customers pay in advance by Direct Debit?

Paying in advance by Direct Debit helps us keep our costs down and means we can buy your gas and electricity in advance. We then pass these savings back to you in our great value plans.

More broadly speaking, there are benefits to staying in credit. Being in debt to an energy company makes it harder to switch to a cheaper supplier, which means a less competitive energy market and higher bills.

We’re trying to make things better. Having a credit balance gives you the flexibility to change suppliers.

If you need more help

More help is on hand for this topic on the OVO Forum. And if you don't find the answers you need, feel free to ask a question and one of our forum users can help.