Energy direct debit warning over bill hikes by suppliers – your rights explained
SUPPLIERS have been warned about hiking direct debits after customers reduce their energy usage.
It comes as households across the country change their habits to reduce the amount of gas and electricity used to combat high bills.
Grant Shapps, Secretary of State for Business, Energy and Industrial Strategy wrote to the CEOs of domestic energy firms over the weekend.
Mr Shapps said that he was “disturbed” by recent reports which show that energy firms are upping the direct debits of customers who have reduced their usage.
He said in his letter to suppliers: “I was disturbed to read media reports that some customers are saying their direct debits are going up when they are making huge efforts to reduce their usage to save money at a time when household incomes are squeezed.
“It is in all our interests that when consumers take sensible steps to reduce their own bills, they are able to see an impact in their bills.”
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Households that pay their energy bills by direct debits take advantage of the lowest gas and electricity rates.
Those on prepayment meters or who pay on receipt of bills pay higher unit rates.
Under the Energy Price Guarantee, a typical household that pays their bill by direct debit will pay no more than £2,500 a year.
But the guarantee only limits the amount that firms can charge customers for each unit of energy.
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So if you use more energy than the average household – expect to pay more than £2,500 a year.
But the majority of households that pay by direct debit don’t end up paying for the exact amount of energy used each month.
Households can use an energy usage calculator like the one provided by MoneySavingExpert.com to compare the true cost of their usage with their direct debit amount.
How do energy direct debits work?
There are two main types of energy direct debits – fixed and variable.
Most energy customers pay a fixed direct debit, which means you pay a fixed amount every month.
Your energy company will work out the cost of your energy for the year ahead and divide this into equal payments.
Most energy firms will use the average amount of gas and electricity used in previous years to calculate your monthly instalments.
With a fixed direct debit you can spread the cost of your energy use without any surprises.
If your energy supplier has upped your fixed direct debit amount even though your usage is down, you can request that the fixed monthly charge is brought down – we’ve explained how to challenge your bill below.
Those on fixed direct debits are more likely to build up credit during the warmer summer months and if you’re in credit but your direct debit has risen substantially this winter it’s worth challenging it.
But some energy companies give customers the option to pay with a variable direct debit.
With a variable direct debit, you can choose to pay a varying amount every month or every quarter, depending on the energy you use.
You’ll pay for the energy you use, this means you’ll likely pay more in the winter and less in the summer.
Some experts argue that this type of direct debit method makes it harder for households to budget in the colder months but if you only want to pay for what you use each month then a variable direct debit may be a safe bet.
How to challenge your bill
Before you dispute your bill it’s worth using an energy calculator to work out exactly how much your usage costs on paper.
You also need to be aware of your rights.
If you pay by direct debit, then this monthly amount should be “fair and reasonable”.
If you don’t think it is, you can complain to the company in the first instance.
If you’re not happy with the outcome you can take it to the independent Energy Ombudsman to dispute, but there are a few steps before you get to that stage.
Your supplier must clearly explain why it’s chosen that amount for your direct debit.
If you’ve got credit on your account, you have every right to get it back – although some experts recommend keeping it there through the summer, so your bills don’t go up in the winter when you use more energy.
Your supplier must refund you or explain exactly why not otherwise and the regulator, Ofgem, can fine suppliers if they don’t.
If you are disputing a bill, taking a meter reading is a must.
That way the company can’t rely on estimates, which may lead to you being overcharged – a reading leaves no room for error either, as it shows precisely what you actually used.
If it’s lower than your estimate, you can ask your provider to lower your monthly direct debit to a more suitable amount.
Martin Lewis’ MoneySavingExpert team says that if you find you’re always in credit, you should request the direct debit be lowered to reflect your actual annual usage and meter readings.
But beware that you don’t end up in debt later on with a bigger catch-up bill at the end of the year from underpayments racking up.
If you don’t have success in negotiating a lower payment then you can put in a complaint.
You can usually get in touch with your provider by email, letter or telephone, but keep a record of contact that you make so you can reference it later if need be.
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Charities like Citizens Advice have template complaint letters you can use to help with the process.
Meanwhile, free online tools from Resolver.co.uk can also help you track and manage a complaint step-by-step.