Ofgem has held the power to direct a supplier to ringfence customer credit balances since 20 September 2023, the regulator has confirmed in an explanatory note on its published credit balance data. The power applies where a supplier does not hold cash equal to or greater than 20% of its gross domestic customer credit balances (CCBs) net of unbilled consumption, meaning energy a customer has used but not yet been charged for1.
The regulator has also begun publishing data on customer credit balances and says it will continue to do so quarterly, on its Retail market indicators page1. The published measure covers gross domestic CCBs of fixed direct debit domestic customers, net of unbilled consumption. Ofgem states that these figures relate only to households in credit, and that including households in debit or with a zero balance would produce a lower average1.
As of the end of December 2023, the policy measure stood at £3.76 billion, against a previously quoted gross figure of £8.1 billion. Ofgem maps the difference back to the original total through four components1:
| Component | Value |
|---|---|
| Non-fixed direct debit domestic customers | £725 million |
| Unbilled consumption | £2,886 million |
| Seasonal component | £450 million |
| Closed account | £357 million |
The 12 month average on Ofgem's chosen measure is £3.7 billion, which the regulator says better reflects how households use balances to smooth costs across the year than the previously quoted gross figure of £8.1 billion1. On a per household basis, the lowest figure, £179 for March 2023 at the end of winter, represents 107% of a typical household bill being covered. Across suppliers, the bottom quarter held £249 per household at the end of December 2023, while the highest quarter held £402 per household, a spread of roughly £150 that Ofgem describes as relatively stable through time1.
"Since 20 September 2023, where a supplier does not hold cash equal or greater to 20% of its gross domestic CCBs net of unbilled consumption, we have the power to direct that supplier to ringfence funds."
Ofgem states that customer credit balances are protected when a supplier fails, but that these costs can be recovered from all consumers, which is why it says suppliers should not be reliant on excess CCBs and should hold appropriate liquidity1. On consumer standards, the regulator says suppliers must ensure fixed direct debit amounts are based on accurate and up to date information so that credit balances are not excessive, and that customers can recover credits or seek to adjust payments1.
Why it matters for households
A credit balance is money a household has paid to its supplier for energy it has not yet used. Under the energy supplier financial resilience rules, the ringfencing power is intended to mean that where a balance is too high, the supplier has the money on hand to repay it in a timely manner1. That matters to a home's energy independence because a credit balance is household money sitting with a company rather than in the household's own account, and its safety depends on the supplier's finances rather than on the customer's own arrangements.
The figures also show how much of that money is tied up. Ofgem's measure excludes unbilled consumption, closed accounts and non-fixed direct debit customers, so the £3.76 billion headline is smaller than the £8.1 billion gross figure previously quoted1. Ofgem notes that balances should rise in summer when consumption is lower and be spent in colder months, and that balances would be expected to lag behind changes to bills such as an adjustment of the price cap1. Households can ask their supplier for a refund of their net balance at any time, and Ofgem says it will monitor credit balances and complaint levels over the winter period1. The Ofgem guide sets out the regulator's wider remit.
What happens next
Ofgem says it will continue to publish the data quarterly, and that supplier level breakdowns will be used in its ongoing supervisory activities. It says it will be engaging with some suppliers on customer credit balances, and that it has the power in certain circumstances to direct suppliers to ringfence CCBs where that is in the consumer's interest1. No further dates have been reported.
Sources1 cited
- Customer credit balance explanatory note, ofgem.gov.uk