If you check your energy bill when it arrives each month you'll have noticed that it usually shows either a credit or debit balance. A credit balance means you have paid your energy supplier more than the cost of the energy you have used, while a debit balance means you have not paid enough. Many people find this confusing, or even concerning, but having a balance on your account is perfectly normal - and doesn't stop you switching to a better deal. Here's is our guide to why balances occur and what you can do about them.
To calculate what your monthly payment should be, your energy supplier takes your estimated annual usage, multiplies this by your tariff rates to get an estimated annual cost and then divides that figure by 12 – so you pay the same amount every month:
MONTHLY PAYMENT = (ESTIMATED ANNUAL USAGE x TARIFF RATES) / 12
However, you don’t use 1/12th of your annual energy consumption each month. In fact, during the Winter a typical household will use 40% more electricity and 3 times more gas than it does in the Summer!
As the amount you pay each month isn’t actually the cost of the energy you have used in that month - sometimes it is more, sometimes it is less – it is normal for your account balance to be in debit or credit. However, the totals should match at the end of the year, eg: for a customer who uses £1,200 of energy a year the figures would look like this:
How much of the year you spend in debit or credit depends on when you switched to your current supplier - it is possible to spend almost the whole year in credit or debit!
Provided the supplier’s calculations are correct your annual payments will cover your annual usage, so having a debit balance on your account should only be a temporary situation.
If the value of your debit or credit balance is less than two monthly payments it is almost certainly due to the difference between your payment amount and the seasonal phasing of energy consumption as shown above. However, if the value is greater than this you should contact your energy supplier to check:
i) They have got accurate usage figures and provide them with a meter reading - Some suppliers may ask for a photo.
ii) They have set your monthly payment to the right level and get it adjusted if necessary - Some suppliers may ask you to do a "space test". This is where you will take two meter readings, one week apart.
If there is a debit balance on your account, your current supplier can object to you switching away. While this can be a surprise to first time switchers you shouldn’t let this stop you from switching to a better deal.
Remember, you are only ever charged for the energy you actually use. So if your account is currently in debit it’s because over the last few months your payments haven’t covered the cost of the energy you have consumed. If your supplier objects to a switch due to a debit balance our advice is:
i) If you can afford to pay off the debit, do so and switch to the better deal ASAP – you don’t want to keep paying more for your usage than you should be.
ii) If you can’t afford to pay it off, call your supplier and ask them if you are on their best rate. Moving from the standard tariff to the best rate with your current supplier could cut you bill by 25%, which will enable you clear the balance faster and you can then move to an even better deal without needing to make a one off payment.
iii) If you can’t afford to pay it off and can’t switch to a lower deal with your current supplier, look back through your bills and work out when your account will be back in credit and make a note in your diary to switch then.
But, whatever you do, don’t let the fact you have a debit balance today, put you off switching long term.
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