Plans to protect energy bill credit
People who are in credit with their energy supplier could stand a better chance of getting their money back should the company go bust, under proposals from Ofgem.
They're suggesting that a safety net be in place to provide the means of paying back customers who have overpaid their bills, in the extremely unlikely event that an energy provider fails.
That safety net would be created via a small charge on all our energy bills - so one company's customers would be bailed out by everyone.
Ofgem are also looking at other means of ensuring that customers don't lose out should their supplier become insolvent, including ring-fencing in-credit balances.
Worst case scenario
As most suppliers allow customers paying by direct debit to spread the cost of their energy usage across the year, many of us find that we gradually build up credit with them over the summer months - to be put towards the higher bills we'd expect in the winter.
Ofgem say the typical account credit peaks at around £100 - but the regulator warns that "without regulatory intervention", we're unlikely to receive much of that back, if any, should the worst happen to our supplier.
That's because when any company becomes insolvent, whatever industry or market they're in, there's a pecking order when it comes to who gets their money back and when.
"Secured creditors" come first - which in this case may include those owed money for property used by the company, and others within the energy industry with whom they have wholesale or supply agreements.
Customers, however, often count as "unsecured creditors", and come towards the back of the queue.
While no one likes the thought of losing money, Ofgem point out that some households would be much more seriously affected than others were they to lose any bill credit they've built up.
For vulnerable customers, or those near or in fuel poverty, building up a small amount of credit during the summer may be the only way they can afford to have the heating on at all during the winter, for example.
So while Ofgem's first task when one supplier collapses is to find another supplier to step in and keep the lights on, the regulator have said that they'll take into account whether the replacement company can protect some or all of our existing credit balance.
Depending on the circumstances behind the previous company's failure, this is one of the occasions when Ofgem will look more kindly on the new company claiming what are known as "last resort supply payments".
These help the new supplier cover any costs incurred as a result of stepping in - and Ofgem say that usually they'd expect an efficient supplier "to be able to cover its own costs and not rely on additional payment".
This is where the new safety net, paid for by us, could prove useful - and Ofgem say it would have only a "small impact" on our bills.
Should a company go bust, there'd already be a fund from which to pay back customers "on a case by case basis" - in other words, making sure they get as much back as possible.
But just as they're aware that losing existing bill credit could affect some users more than others, Ofgem say that adding such a levy onto everyone's bill could have a greater impact on those least able to afford it.
So they're also considering other method of protecting our credit - including making the energy companies ring-fence prepaid and in credit balances.
Back in 2013, British Gas managed to boost their accounts by an estimated £20 million after absorbing unclaimed bill credit into their company accounts.
The bigger energy providers are now supposed to offer us a refund at least once every year if we're in credit - and in late 2014 a campaign was launched aiming to get former customers to check whether they were due money back from their old providers.
Prior to that, unclaimed bill credit was supposed to be earmarked for up to six years in case a customer got back in touch to ask for their refund.
Now, although any money that's been unclaimed for more than two years is meant to be put towards schemes to help vulnerable customers, the supplier is also supposed to be able to refund any former account holder with a valid claim no matter how long it's been since they left.
Unless the company goes bust - in which case, any former customers' bill credits go towards paying off the company's debts, just like those of existing customers.
Ring-fencing those balances - keeping them separate from the company's other accounts - would ensure that customers would get back any money that hasn't yet paid for actual energy used.
However, Ofgem point out that when we overpay our bills, we provide our suppliers with "an important source of working capital" - allowing them to invest in infrastructure or secure energy supplies at a more competitive cost.
This isn't as much of an issue for the bigger suppliers, but it could seriously affect the ability of small and independent companies to compete effectively - which could then lead to higher bills all round.
Credit when it's due
So while they're consulting on the above methods of protecting the payments we've already made, Ofgem are keen to remind us that we're allowed to ask for a refund if we find we're in credit with our provider.
Although some will only agree if we're in credit by more than a certain amount, and others will offer us incentives to stay as much in credit with them as possible, energy suppliers cannot unreasonably refuse to refund us.
There's more on the art of reclaiming bill credit in this guide.