Martin Lewis urges direct debit customers to check they are not overpaying on energy bills | Personal Finance | Finance
The Government’s Energy Price Guarantee came into effect in October last year, capping the unit price of energy. This meant average annual bills rose to £2,500 a year, an increase of around 27 percent.
But Mr Lewis said on his BBC podcast many direct debit bill payers had got in touch to say their energy had “gone up significantly”, with some seeing their charges double.
In January, energy regulator Ofgem is set to change its price cap, which will result in people paying more on their monthly bill – which many will not be expecting.
He told listeners: “If you’re in credit, the logic would dictate that your direct debit increase should be roughly in proportion to the price rise.
“If it’s 30 or 40 percent, you’re in the right ball park, but if it’s 50, 60, 70, 80 percent, you want to check what’s going on.
“I would note that at this time of year, going into or just starting the Winter, you would want to be in credit, that’s the whole point of the monthly direct debit cycle.
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“It smooths out your usage, so you’re generally in credit when you go into Winter and you’re in debt when you come out of it, but then in the low use summer months, you start to build back that credit. That’s how it should work.”
He urged consumers who pay by direct debit to make sure they have a working smart meter, which automatically provides readings, or to do a reading themselves, to make sure they are getting accurate prices for their usage.
For those whose direct debit has increased substantially more than 27 percent since the October increase, Mr Lewis urged using an online calculator to check if the figure is correct.
For example, comparethemarket.com has a Bills Calculator, which works by a person inputting their postcode and information about their property, to provide an estimated average for their area.
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If the estimate is well below what a person is paying, they can then put this figure to their supplier.
Mr Lewis explained: “You want to politely call them up, tell them that you’ve done the calculation, and ask them to justify why your direct debit is going up so much, when you’re in credit and your prior usage does not indicate it.
“This is especially important as many people are cutting usage this year as compared to previous years, so their direct debits may be disproportionately, far more too high.
“If it is too high, you want to ask them to lower it. You have a right under the energy firms licence conditions to have a fair direct debit.”
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He suggested instead moving to variable direct debit, where people pay according to their usage for each month.
He explained: “It’s very similar to payment in receipt of bills, except because you’re using a direct debit, you get the much cheaper rate.
“The pro of this is you’re not paying any more than what you use. The con is monthly direct debit is actually a good idea to smooth out the usage, and it means in those expensive Winter months, you’re getting to be shelling out a lot more than you would on a fairly set monthly direct debit.”
Some bill payers may also have seen their charges go up from the start of the year, when the Ofgem price cap increased.
This will likely mean only a small increase, with those who pay on a prepayment meter seeing their bills rise by 0.8 per cent, while those on receipt of bills will likely see an increase of 1.4 percent.
The Energy Price Guarantee is increasing from April, when average annual bills will go up to £3,000 a year.
