The situation in August 2022
The average UK household annual energy bill is now expected to jump 70% to £3,358 in October.
Cornwall Insight predicts that in January 2023 there will be a further increase to about £3,600. That’s almost treble what it was at the start of this year.
The government’s current help with energy bills, including £400 off everyone’s electric bill this winter, and cost of living assistance to people on benefits, doesn’t come close to covering these huge increases. One in three households is now expected to be in fuel poverty from October.
Most of the government help is also being given as a “one-off” in 2022. But there is no sign that energy bills will start dropping soon. Cornwall Insight expects them to stay well above £3,000 throughout 2023.
Much more help is needed. But this may not arrive by October, or it may not be enough for your household.
What are your options if you can’t pay the energy bills?
People are getting desperate:
- you may be looking at drastic reductions in your energy usage, such as not switching the heating on in winter;
- with a prepayment meter, you may be planning to disconnect, known as self-disconnecting, for periods;
- if you pay by Direct Debit (DD) or when the bill arrives, you may be thinking of stopping paying, so you get into arrears but you are more in control of what you are paying.
- a campaign group called Don’t Pay UK is suggesting supporters paying by direct debit cancel it in October.
None of these is an easy solution.
Reducing your energy usage can be very hard, bad for a range of health conditions and can lead to a damper home. Self-disconnecting with a prepayment meter may lead to debt as the standing charges are still added on every day. Cancelling a direct debit brings several problems – see below.
Before you choose any of these options, read Can’t pay your bills & debts? What can you do and what help can you get? That looks at other help you may not know about. And energy bills are priority debts – this means that you should stop paying non-priority debts such as credit cards and loans to be able to pay your energy bills.
The Don’t Pay UK campaign
I agree with the Don’t Pay UK campaign’s aims when it says:
Millions of us won’t be able to afford food and bills this winter. We cannot afford to let that happen. We demand a reduction of bills to an affordable level.
The campaign is proposing to put pressure on the government and the energy suppliers by getting a million people to pledge:
We will cancel our direct debits from Oct. 1 if we are ignored.
But should you decide to do this?
The DontPayUK website doesn’t explain fully how cancelling an energy direct debit may affect you. I think it should set out these risks so you know what may happen.
UPDATE on 5 August, Don’t Pay UK added new sections to their FAQs on Will striking affect my credit score? and Will striking affect my mortgage repayments?
Problems that may happen if you cancel your direct debit
1) Your bills will increase if you don’t pay by DD
You will probably be charged a fee if you fail to make a payment – this should be set out on your supplier’s website.
But this isn’t the only extra cost. Paying by Direct Debit is the cheapest way to pay for electricity and gas. If you cancel a Direct Debit, your energy supplier will start sending you bills that will be at a higher rate.
After the 54% price rise in April, many people thought their energy supplier was increasing their Direct Debit too much and they wanted to have more control over what was taken. Martin Lewis estimated it would cost over 6% more to pay by quarterly bills instead of Direct Debit.
2) Your credit score is likely to be harmed if you get into arrears
Energy firms report to Credit Reference Agencies such as Experian, Equifax and TransUnion.
Missed payments and defaults on an energy bill can harm your credit score in the same way that missing a payment to a loan or credit card would.
Cancelling a Direct Debit doesn’t necessarily mean you will miss a payment, if you pay very soon by bank transfer.
I have seen suggestions on social media that your credit record won’t be damaged if you make a complaint at the same time as cancelling your direct debit. A complaint can go first to your supplier and then to the Energy Ombudsman.
It is correct that an energy supplier should not harm your credit record if there is a potentially valid dispute about a bill. But I don’t think saying you cannot afford the ongoing bills as the prices are too high would be seen as a valid reason to complain.
3) Your energy supplier may want to fit a prepayment meter if you are in arrears
When you miss a payment, your energy supplier will want you to make an arrangement to pay your ongoing bills plus some extra towards the arrears.
Prepayment meters are almost always a bad idea for you – they make it harder to budget, not easier.
The supplier should take into account your financial circumstances in setting the arrears payment, But the problem for millions from October will be that they cannot afford the ongoing bills, let alone any extra towards the arrears…
If you have arrears and do not make an arrangement to pay and then start paying it, your supplier is likely to tell you they’re going to move you to a prepayment meter. It is common for prepayment meters to be fitted because of arrears.
They can get a Warrant from a Magistrates Court to enable them to enter your home and fit a prepayment meter.
If you have a smart meter, it is possible that could be switched to being a prepayment meter – this is called “remote switching” as no-one has to enter your home. Before this happens, your supplier should have:
- contacted you to discuss options for repaying your debt; and
- visited your home to assess your personal situation and whether this would affect you being disconnected, eg if you’re disabled or elderly.
But sometimes these checks are not happening and people find their smart meter has just been changed to be a prepayment meter.
You may be able to argue you cannot have a prepayment meter for health or access reasons, see When you can refuse to be moved to prepayment.
Paying for your energy by prepayment meter is more expensive than direct debit. You may be forced to restrict your energy usage a lot and even self-disconnect for periods.
Problems that are very unlikely to happen
4) A County Court Judgment (CCJ) and bailiffs visiting
I have seen some “experts” saying in newspapers that you could get a CCJ and bailiffs if you stop your direct debit and get into debt. A bailiff cannot visit for an energy debt unless the creditor has got a CCJ.
Although it’s not impossible, this hasn’t been a problem in the past for arrears that build up for your current property.
Suppliers prefer to go to the Magistrates Court to get prepayment meters fitted, where they can then get payments deducted for the arrears. Going to the County Court for a CCJ is a much slower process and may not result in the supplier being paid.
Suppliers do go to court for a CCJ for debts that relate to a previous property because in that case they cannot make you have a prepayment meter.
5) There is almost no chance of being disconnected
Disconnections used to be common. 20 years ago there could be more than 15,000 in a year.
But then suppliers started getting prepayment meters installed instead.
6) There is NO chance of being sent to prison
Not paying an energy bill is not a criminal offence. You cannot be sent to prison for this.
Meter tampering, to by-pass a meter or make it run slower, is a criminal offence you can go to prison for. It can also be dangerous and result in fires – don’t even think about it. The Don’t Pay UK campaign is not advocating any of these illegal and unsafe options.
(An aside – another thing to ignore is any adverts for devices you can plug in that claim to reduce your energy consumption. They don’t work. Don’t waste your money on scams.)
Would these problems arise if a million people join the campaign?
I have listed the problems that may happen if you cancel your energy direct debit. But how likely are they and how long would they take to happen?
The DontPayUK campaign points out that the Poll Tax was scrapped after millions refused to pay it. But 1990s council tax payments were a largely administrative process that could easily be brought to a halt. And not paying the Poll Tax did not show on your credit record.
Energy billing in 2022 is very different. It is very likely that adding late payment charges, removing the DD discount and reporting missed payments to the CRAs are totally automated and would happen within weeks. It won’t make any difference if your supplier has to do this for 1,000 customers or 100,000.
Fitting a prepayment meter is a much slower, manual process. First the energy supplier has to try to get you to set up an arrangement to pay. For just a few customers who refuse to set up an arrangement, it could take two or three months to fit a prepayment meter.
But there aren’t a million prepayment meters ready to be fitted in the country. There aren’t trained staff to fit them. And it would clog up the magistrates’ courts if people wanted to object… So if the DontPayUK campaign takes off, you would be pretty unlucky to be one of the few that has a new prepayment meter fitted quickly, but it’s not impossible.
There is a much larger risk that if you have a smart meter, this will be switched remotely to act as a prepayment meter.
No easy options
After you have covered your essential payments – rent/mortgage, feeding the family, filling up the car so you can get to work etc – there may not be enough money left to pay the direct debit your energy company wants.
You may be worried about the consequences of canceling the energy Direct Debit.
Talk to a debt adviser about whether there are any other options, such as dealing with your non-priority debts. Or if there is any other help you can get with your finances.
When there are no easy options, it’s important that you know the facts so you can make an informed choice.
UPDATE – The situation in November 2022
In September a two year energy price cap was introduced by the short-lived Truss government – this meant the average household would pay about £2,500 a year in energy bills.
This guarantee was then cut to just 6 months by the new Sunak government. In the Autumn Statement, it was announced that the cap would go up to £3,000 a year in April 2023 – an extra £500 on the average household’s bills. And the £400 help with electricity bills over the winter of 2022/23 will not be repeated next year. Only households getting benefits will get extra help in 2023.