The energy company Ovo has announced that it is going to start paying its customers interest on any amount they have overpaid on their bill.
Ovo said it believes that its customers should be rewarded for paying upfront for their gas and electricity, so from 1 July 2010 they will earn three per cent interest per annum on the credit balance in their accounts.
Ovo is the first national energy company to offer rewards for in credit balances; whilst not directly connected to the Bank of England base rate, the interest rate is variable, and will be reviewed every six months.
"We think it’s only fair we pass on any interest we’ve earned on customers’ credit balances, and that we reward people for prepayment," said Stephen Fitzpatrick, managing director and founder of Ovo Energy.
Whilst Ovo strives to set appropriate direct debit payments with its customers, it said that the new offer is an attempt to eradicate one of the biggest sources of complaint in the energy industry, which is that consumer lose out on interest while their energy provider hangs on to the cash they have overpaid on their energy bills.
When customers receive an energy statement, either monthly or quarterly depending on their preference, their account will be automatically credited with the interest which corresponds with that period, but customers can only prepay for up to one year's worth of energy.
"A big driver behind setting up Ovo was to give customers a better, fairer deal," Mr Fitzpatrick said. "But offering consistently competitive prices and doing our utmost to make sure direct debits are set at the right level isn’t enough."
Direct debit customers on either fixed or variable tariffs will benefit from the rewards, which will be paid monthly, rather than in the winter when less energy is used and customers are not as likely to be in credit.
Maria Wardrobe, director of communications for National Energy Action (NEA), the national fuel poverty charity, supports Ovo’s scheme: "In encouraging customers to pay monthly this initiative is a welcome move. At NEA we know that budgeting for energy bills helps protect customers from falling into debt which is essential in the current economic climate."
Emma Bush, energy expert at uSwitch.com, also welcomed the move, but reminded customers to still compare gas and electricity prices and not to get distracted by the attractive interest rate. She said, "it's important that consumers don't let this blind them to the most important feature which is the price of the actual energy they are using. It's still important that consumers ensure that they are paying a competitive price and this will usually be by being on the most competitive online plan in the market."
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