Energy Suppliers and Direct Debit. Lessons from Recent Ofgem Reporting
Introduction
Direct Debit remains the predominant payment method for UK energy suppliers, supporting millions of household collections each month. However, recent Ofgem reporting highlights key trends in credit balances, arrears, and payment behaviours — providing valuable insights for suppliers and bureau managing collections.
This article examines the latest Ofgem data, explores what it reveals about consumer payment patterns, and offers actionable strategies for energy suppliers to optimise Direct Debit collections while supporting customers responsibly.
1 — Recent Ofgem insights (Q2–Q3 2025)
Key findings from the latest credit balance and arrears data:
- Average credit balances: Households with Direct Debit payments had average credit balances of £45–£55, slightly up from £42 last year, reflecting cautious payment behaviour in a high-cost energy environment.
- Arrears prevalence: Approximately 7% of Direct Debit accounts experienced missed payments or partial collections in the last quarter.
- Sector differences: Larger suppliers had slightly lower missed-payment rates (~6%) than smaller suppliers (~8%), suggesting economies of scale and stronger payment infrastructure play a role.
- Impact of payment holidays and vulnerability support: Households offered flexible repayment plans or payment holidays were less likely to default repeatedly, indicating the importance of proactive engagement.
(Source: Ofgem Energy Account Credit Balance & Arrears Report, Q3 2025)
2 — Direct Debit patterns in energy collections
| Pattern | Observation | Implication |
| Payment timing clustering | Many households schedule collections around salary dates | Optimise collection dates to reduce failures |
| Low-value fluctuations | Micro-credits accumulate due to overpayments | Regular reconciliation prevents customer confusion |
| Seasonal variation | Higher arrears in winter months | Forecast and communicate proactively to manage cashflow |
Insight: Direct Debit is reliable, but seasonal, behavioural, and demographic factors require dynamic management.
3 — Strategic implications for energy suppliers
- a) Staggered collection dates
- Avoid concentrating collections on the first of the month; align with household pay cycles to reduce insufficient funds failures.
- Consider segmenting accounts by risk profile and salary patterns.
- b) Proactive notifications
- Advance notice of collection amounts builds transparency and trust.
- Automated reminders (SMS/email) 2–3 days prior to collection improve success rates.
- c) Smart failure management
- Implement predictive retry schedules similar to fintech AI tools: retry on days when account balances historically clear.
- Early engagement reduces arrears and reliance on manual interventions.
- d) Flexible repayment options
- Offering structured repayment plans for missed Direct Debits reduces long-term arrears.
- Consider linking repayment schedules to Direct Debit mandates for automation.
- e) Continuous monitoring and reporting
- Track failure rates missed payment patterns, and average arrears by segment.
- Compare internal metrics to Ofgem benchmarks for continuous improvement.
4 — Operational tips for bureau handling energy clients
- Automate mandate validation: Ensure active, up-to-date mandates to reduce rejected payments.
- Integrate forecasting tools: Use historical consumption and payment data to predict arrears and plan cashflow.
- Custom reporting dashboards: Offer clients insight into high-risk accounts, seasonal trends, and cumulative credit balances.
- Regulatory alignment: Ensure communications and repayment plans adhere to Ofgem’s Vulnerable Customer guidelines.
5 — Case example: mid-sized supplier
A UK energy supplier serving ~200,000 households implemented:
- AI-assisted retry scheduling
- Pre-collection SMS notifications
- Monthly arrears reporting dashboards
Results over six months:
- Collection success rate improved from 92% to 96%
- Arrears reduced by 18%
- Customer complaints about overpayment or failed collection dropped by 25%
The supplier credited predictive scheduling and proactive communication as the main drivers of improvement.
6 — Key metrics for energy Direct Debit collections
| Metric | Target / Benchmark | Notes |
| Direct Debit collection success rate | ≥96% | Align with Ofgem averages |
| Failed collection recovery | ≥80% within 7 days | Use predictive retry tools |
| Average credit balance per household | £45–£55 | Monitor to avoid overpayments |
| Arrears prevalence | ≤7% | Compare to industry norms |
| Customer complaints per 1,000 accounts | ≤10 | Measure satisfaction with collection process |
7 — Conclusion
Ofgem’s latest reporting provides a clear roadmap for energy suppliers: Direct Debit is efficient, but success depends on proactive, data-driven management. By adopting predictive retry logic, offering flexible repayment plans, and monitoring seasonal/behavioural patterns, suppliers can:
- Reduce arrears
- Protect cash flow
- Improve customer trust and compliance
Direct Debit bureau serving the energy sector should integrate analytics dashboards, predictive collections, and regulatory compliance tools to support their clients in achieving these outcomes.
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