Ofgem says you shouldn’t cancel the direct debit to your energy supplier.
This is in response to the Don’t Pay UK campaign, which is suggesting supporters cancel their energy direct debits on October 1st:
It’s simple: we are demanding a reduction of energy bills to an affordable level. Our leverage is that we will gather a million people to pledge not to pay if the government goes ahead with another massive hike on October 1st…
Even if a fraction of those of us who are paying by direct debit stop our payments, it will be enough to put energy companies in serious trouble, and they know this. We want to bring them to the table and force them to end this crisis.
So it’s unsurprising that Ofgem don’t like the idea…
Ofgem CEO Jonathan Brearley says cancelling your DD will drive up costs for everybody. It sounds like he’s mainly worried about costs for energy suppliers, not for customers. Even if a few more energy firms go under, that’s going to take a long while to filter through into higher bills.
He also says it will impact you personally. I have written about this in detail here Should you cancel your direct debit if you can’t pay your energy bill?
Yes, it will affect you, and you should know about this.
But if you can’t afford to pay the direct debit now, or when it goes up a lot in October, what options do you have that will be better for you? Today’s news is that the typical energy bill may rise to £4,266 in January – that would be a direct debit of more than £350 a month.
Let’s look at what Ofgem is suggesting.
“Ask your supplier for support”
Ofgem says:
We are working round the clock to make sure consumers pay no more than is necessary and are supported by suppliers in any way possible.
But “Pay no more than is necessary” doesn’t actually mean what you pay can be reduced. It means the supplier will try their best to get your bills accurate, not decrease them.
“In any way possible” doesn’t mean that at all. It just means in any way that won’t cost the energy suppliers much.
Some suppliers will have small ways to help all their customers – Octopus may be offering half-price electric blankets this autumn. Perhaps other suppliers will send you some warm socks or a free energy-saving bulb. But if your direct debit is a couple of hundred pounds more than you can afford, this sort of support isn’t going to solve the real problem.
There is some other help available from suppliers. You can get a small amount of emergency credit if you have a prepayment meter. If you have a very low income and arrears, most large suppliers have a hardship fund that can help.
But this extra help is very limited. It won’t stretch to cover the millions who are going to need a lot of help in October.
“Payment plans you can afford”
Ofgem says:
Our rules mean suppliers must offer payment plans you can afford.
That sounds like it could be just what you need, doesn’t it!
But these payment plans are plans to repay arrears. You are expected to pay the normal bill plus an amount towards the arrears. Because it is helping with the arrears, you have to have already missed payments to benefit.
The payment plans won’t reduce your ongoing bills to an amount you can afford.
“Get government support, charitable help or grants”
The government is providing extra help for people on benefits this year. Everyone, on benefits or not, will get £400 off their winter electricity bill. But this help was set up in May when the October price increases were expected to be much smaller, so it is now looking completely inadequate.
Some energy suppliers offer schemes. And there may be other help available from charities. But this is very limited. If you don’t get any means-tested benefits you may not be eligible for any grants or help.
“Get debt advice”
Some people will benefit from debt advice. But there is no way millions of people can access debt advice this winter.
And even for those that do get an appointment, debt advice isn’t a magic wand.
Citizens Advice data tracks the way energy problems are ballooning this year. At the end of June, it had already seen more people asking for help with energy issues than in the whole of either 2020 and 2019. It says:
We’re seeing a truly unprecedented number of people who can’t afford to top up their prepayment energy meter, and therefore can’t do the basics like turning on their fridge or heating their hob.
At the moment, 46% of Citizens Advice debt clients do not have enough income to pay all their priority bills and debts, even if they pay nothing to credit cards and unsecured loans. That number will get much worse with the energy bills rises in October.
If you have no chance of repaying your debts, a debt adviser can help with insolvency such as a Debt Relief Order. That will clear energy bill arrears. But it won’t help you pay the next month’s impossibly large energy bill.
Perhaps you could pay the energy bill if you stop paying your credit cards or unsecured loan? Then you won’t get missed payments on your energy account harming your credit record. But your credit record will still be wrecked with missed payments or payment arrangements for your other debts.
As one debt adviser said:
energy firms have long used debt advice referrals as a way of washing their hands of their poorest customers, as though “doing a budget” can solve the problems of depressed incomes and overpriced energy. In the current climate it’s unsustainable.
Debt advice can help individuals through hard times. It is not the answer for the whole country when a very large percentage of households have energy bills they can’t pay.
Ofgem hasn’t suggested anything that will be widely useful
Ofgem has no practical help for the millions facing an energy bill crisis this winter.
Apart from help from the government, the help available is small scale and will be limited to people on very low incomes. Or confined to help with arrears – so to get that help you need to have stopped paying the energy bills.
Not paying an energy bill is likely to harm your credit record. But if you cannot afford to pay it, what alternative do you have that will protect your credit record? Most people do not have enough savings to let them cover a couple of months of the coming high bills.
Ofgem’s suggestions sound much better than they actually are. Good for getting quotes in newspapers but not useful for people who are feeling desperate about what will happen this winter.
Can’t pay your bills & debts?
Refunds from loans, cards, car finance etc
More than a third of IVAs fail
Chris Bone says
As a debt adviser confirms what I have been thinking for a while now from a front line viewpoint…..the options for dealing with energy debt effectively are being narrowed down significantly. Pretty much either change to prepayment mode, (can be costly and risk of self disconnection), or Insolvency (can help in short term but realistic concern that the same issue will arise again sooner rather than later.)
More help needed!
Sara (Debt Camel) says
yes more help from the government is the only way. And not just for people on means-tested benefits.
A lot of the “don’t cancel your direct debit” advice in the media is well-meaning and coming from people who have learned how debt advice works – don’t pay the non-priority stuff so you can pay the priorities… I’ve been talking to a few of them and explaining how this isn’t really going to help people in this crisis – and I get asked which debts are the “real” top priorities.
Carole Miles says
That’s ok for Ofcom to say but when your energy company puts your direct debit up and does not tell you, it can put you into in arranged overdraft, with sky high charges.
Plus the energy companies are estimating bills when there is a smart meter in the home.
B Murphy says
Enough is enough it’s my fxcking money it’s AllOur own money it’s time to STOP DD now
. Stop the huge profits…
Mark Newlove says
In reality there is only one option and it will save the UK government a fortune. Instead of propping up companies with appalling business methods as well as the same for customer service.
The energy market has to be taken back under control of the Government the deregulation of the industry has been nothing other than an abject disaster with rises in costs every year that are the result of playing the markets and lack of storage facilities.
Briar says
Has anyone at Ofgem said they will look at the standing charges? The more you cut your energy use the more significant the standing charge becomes. I can’t believe that the energy companies’ costs have increased by up to 300% since last year.
Sara (Debt Camel) says
They are looking at this.
They point out “Let me just give an example of the trade-off you face. If we take money off the standing charge, which we may well do, we are considering that that goes on to what’s called volumetric charge, which means the more you use, you will pay even more. There are no easy answers in the market right now.”
But high standing charges make no sense. And in trying to move to net zero, we want high energy users to be paying more, so they have more incentives to get solar panels, heat pumps and not heat their swimming pools…
So the answer is to get rid of the standing charge, add it all to unit pricing AND support people with low incomes and large energy needs (because of large familes or disabilities) so the higher unit charges don’t hurt them.
Mark Newlove says
It is not that long since standing charges have been reintroduced there used to be upper and lower tariffs for me the standing charges are not the issue. It is the sky high charges per KWH that is the problem.
Sara (Debt Camel) says
But for many single people the standing charges are a massive burden.
Karen Brown says
Had a recent conversation with Octopus for a client, her bill for the month was approximately £150 she paid £180 on D/D this, therefore equates to £30 towards the small amount of arrears that was outstanding. However, Octopus wanted £280 per month – why? because OfGem say this is what the charges should be according to Octopus.
So maybe everyone should just pay their usage if they are in credit and those with arrears – see a friendly (free) debt advisor and get a payment plan in place and/or access to local help.
G Oliver says
We pay by direct debit, but on receipt of our quarterly bill, so we pay for what we use, in arrears. If we went to monthly direct debit, then the supplier would charge us over the odds! I suggest everyone asks to go over to quarterly direct debit.
Dean Russell says
Hi, i dont see why the Standing Charge is still there,
However, cancelling direct debits is not a long term solution. My idea is everybody moves their accounts outside of the big six …..or targets one of the big six, and moves their account from one of them..say N-Power for example. You would need a Martin Lewis as a figurehead or someone of that ilk to lead the campaign. Ditch the six
Caroline says
100% agree with standing charge being removed and added to unit cost. It is discriminatory to low income / low users as paying much more as % of their overall bill. If Ofgem and fuel companies are serious about climate change and providing incentives for high users to reduce usage this is clearly a no brainer. Social media now full of inaccurate information re: credit files, disconnection etc in terms of cancelling DD. Increased demand for the debt advice with no magic wand and still recovering from the MAS fiasco is going to be very tough for many
Mark Newlove says
As will be a two tier system per Kwh this is why they reintroduced the standing charges again either way those on low incomes have very little choice.
Philip mcclennan says
It may be true if you can’t afford your dd and you don’t cancel your dd the banks m’y charge you for a bounce dd catch 22
Kathleen Mason says
3 times as much. the money is then sitting in their bank not yours, ask for monthly bills and pay them monthly, this way you have control of usage and payment. when I got my bill the gas was in credit so could have used that money to knock off my electric bill but they wanted to send me a cheque and wanted the electric paying now. The bill for electric was way lower than what they had estimated my Direct Debit should be, they had not taken in to account the government 400 pounds or my warm home allowance or my fuel allowance in December. The gas would have gone even more in to credit. You can control the payments better EG: central hearing is off for 5/6 months of the year so bills will be much lower, less cooking as eating more salads etc and no using drier for clothes. Yes you pay more by not paying by Direct Debit (by the way why ?) but you will pay less overall as you have more control.
Darren says
Government intervention is needed sooner rather than later.
Bojo reply of saving it for the next PM is shocking how is that meant to help?
I only found out yesterday that EDF is French government (public) owned – in France they have had a 4% raise.
So if your supplier is EDF, your paying the French government.
That said, doesn’t the UK give funds to France and we pay for these funds via various taxes?
Tim says
One further consideration in all of this, and perhaps one of the things that the Don’t Pay UK campaign have in mind, is that if a million people refuse to pay then there is no way that the energy companies could take action against them all because the system couldn’t handle it. There simply aren’t enough debt collectors or enough capacity in the courts, or enough technicians who could be going around fitting prepayment meters. It seems to me that the whole argument is very much like all collective bargaining – if it’s only a few people then the system can ignore them and just walk over them, but there comes a point where it reaches critical mass.
I would suggest one thing that people can do, rather than just cancelling their DDs: set up a standing order for the amount that you can afford. The advantages to this are that the payments are still automated, you keep control of how much you pay, the debt doesn’t increase as much as if you just don’t pay at all, and if it came to court proceedings to have a prepayment meter fitted, you could show that you were paying what you could afford and so make a stronger argument that you are a “can’t pay” rather than just a “won’t pay”.
Ultimately I don’t think the government or the regulator or the energy companies are taking this seriously enough. We are hurtling towards a cliff edge and they are just crossing their fingers, telling us not to panic, and hoping everything will be fine (a bit like climate change?).
Brian Rose says
Good suggestion Tim for people to cancel their direct debit and set up a standing order but only for the level that they can afford. The energy companies will probably say they can’t accept standing orders but I suggest people ignore that and just do it anyway.
Sara (Debt Camel) says
A standing order is just an automated way for you to make the same payment every month. To the energy company it’s no different to you paying Them by bank transfer. They can’t say they won’t accept it unless they don’t want people to pay them.
But they can remove the discount you currently get for paying by DD.
And you will be getting into arrears. Slowly if you already have some credit built up but faster as prices go up and energy consumption goes up in the winter.
But if you can’t afford what the energy company is demanding, you may have little choice. If you have Other debts already, talk to a debt adviser about your options.
Dean Russell says
Ditch the six
Anthony Grey says
Energy may have been inexpensive in the past and not valued appropriately.
The tax on the utility should be a fixed price not a percentage, standing charge if it is to be paid should be fixed not rise with unit charge.
The regulator is frightening must of us with ordinary incomes. (l am a pensioner)
For young people especially with families as well as people receiving no other income than state pension it’s untenable.
If the regulator think record breaking increases in prices which let’s face it pushes up the price of most things is acceptable when these companies are posting record profits they are not fit for purpose.
People will miss meals, live in cold homes with all the attendant problems that will bring and no doubt some will be pushed beyond their limits.
Will Ofgem and the Utility companies be charged with corporate manslaughter as it is their ineptitude and greed which is the cause.
Brian Rose says
You hear politicans talking about the problem of high energy prices being due to the war in Ukraine. If that were true how come energy prices are much lower in France. The difference between the UK and France is the UK has a highly privatised energy market and France’s main energy supplier is owned by the French government. The only quick answer to the current energy crisis in the UK is an immediate windfall tax on the big UK energy companies who are currently making bumper profits. Then, for starters, give all those on Universal Credit an immediate uplift to their benefits and see that the poorest do not go cold and/or hungry this coming autumn and winter.
Fred says
Why oh why, is all the help always focused on those on universal credit / benefits.
The more help those on benefits get, the less incentive there is to work. The more debt is carried onto our children.
Do you really think £350 a month is easier to find for those of us who work..
Sara (Debt Camel) says
A very large percentage of people on Universal Credit and other means tested benefits are either already in work or are pensioners or disabled or have a child under 12 months and the DWP doesn’t expect them to be looking for work.
But I completely agree that millions of people not eligible to claim benefits cannot imagine how they can pay £350 a month.
Kathleen Mason says
There are a lot of people on benefit who are still living at home and I know for a fact that they received the 350 pounds and did not need it
Sara (Debt Camel) says
Yes this 650 cost of living help and the 400 off electricity bills are very crude ways to get help out as fast as possibly. Some money is going to people who don’t need it. Many people who need more are left struggling.
Lin says
Sta.ding charges are to high.
As a single widowed adult this is a huge part of my bills.
It should be removed and a fairer price according to how much you use would be better.
Nearly 50% of my monthly pension will going on utility bills ,house insurance and council tax.i don’t have a car or any TV subscriptions.
Chris Bone says
I have a little bit of empathy for the energy company employees at say call centre level (when you can get through) I just don’t think they know how to respond effectively to huge volume of stressed callers pleading poverty, they are probably operating off set scripts and people are signposted to free advice agencies where even experienced advisors are struggling with effective options for them. Where does the buck stop…..?
Sara (Debt Camel) says
with the government. Ofgem are useless but they don’t have the money to sort this out even if they wanted to.
Lin says
Maybe with hindsight less should be paid to share holders of the vast sums of money made by these huge energy companies.also more realistic salaries to those higher up the ladder e.g company directors and chairperson.
Brian Rose says
Yes Lin, it’s immoral that a few should benefit greatly on the backs of many who are suffering.
Dean Russell says
I would suggest the people at Ofgem look in the dictionary for the meaning of the word CAP
Matt B says
I hope this will stop people voting for capitalism in the future. It is clear how immoral it is, how can any service (utility/health/education/etc) pay dividends to shareholders if it genuinely has the needs of the customer/consumer/patient/student/whoever at heart? The rich cannot get richer at the expense of the poor, literally.
Brian Rose says
Spot on Matt
Matt says
I didn’t think missing a monthly direct debit payment on an energy bill affected your credit rating??
Guess I’m wrong…
Sara (Debt Camel) says
it is missing a payment that may affect your rating. If you cancel the DD and then pay directly that can’t be a problem.
Most energy companies report to one or more credit reference agencies. That doesn’t mean this WILL happen to you if you don’t pay, but it will happen to many people.
Simon Jones says
So what if your credit rating is hot. If you can’t afford to heat your home or cook then you won’t or shouldn’t be looking for credit!
Roger says
There is a simple solution, tell ofgem where to go and not allow the increase to go ahead at all
clive andrews says
Actually, cancelling the direct debits is a real worry for the energy industry because they rely on these payments to provide them with funds to buy gas on the market. If we all paid old school – ie pay for what you have used after you have used it the energy providers have to pay for the upfront costs of energy without knowing if many customers will default leaving the energy companies with the bill – This is why Ofgem don’t want DD cancellations on a big scale – It has the very real possibility of wrecking the way the energy supply system works in this country. –
P swan says
Instead of not paying energy, we should all stop paying taxes.
Sara (Debt Camel) says
Income tax & NI? Most people have them deducted from their wages through PAYE.
Keith says
What many people don’t realise is that an energy company can increase your direct debit without your consent. In effect, they, not you, control how much they will take from your account.
This is banking rules folks, so short of cancelling your direct debit, how can YOU, not them, set a limit on what these greedy rats can take? I was amazed that I was unable to instruct my bank to set my own limit on what they can take
Or are we all sleepwalking into imposed debt while the fat cats get fatter?
You can, apparently, set up a standing order, which gives You control, but none of the Big 6 will let you do this. WHY?
Sara (Debt Camel) says
They have to inform you if they are changing the direct debit amount. If you cannot then get them agree to take less, you have to stop paying by DD if the amount they want is unaffordable.
Be aware of the consequences (see https://debtcamel.co.uk/cancel-energy-dd-dontpayuk/) but if you have no savings and no way to reorganise your budget so you can pay this energy bill, what alternative do you have? Paying the rent/mortgage, feeding the family and filling the car up so you can get to work come first.
You can, apparently, set up a standing order, which gives You control, but none of the Big 6 will let you do this. WHY?
Well they can’t PREVENT you doing this – you just tell your bank the sort code and account you want to pay and set up the STO.
They don’t encourage it as it gives them less control.
And you won’t get the discount you currentl;y get by paying by STO.
Phil says
We were on a supposedly totally Renewable energy Tariff. Why is this cost also changing so rapidly? Wind, Solar and Tidal Farms have predictable installation and running costs – surely all this investment should be keeping our electrical costs low!
Sara (Debt Camel) says
See this video from the Octopus CEO which explains this: https://youtu.be/K6ccUyWwz9g
It is a badly flawed system that needs massive reform – to reduce prices for customers and to incentivise people like you to choose a 100% renewable tariff.
Brian Rose says
That was interesting what the CEO of Octopus had to say especially when he said the present energy market is bonkers. The present crisis has been brought on by the anarchy of the free market system. There’s two types of freedom: one is the freedom for a few to accumulate mega bucks and the other is the freedom of many to suffer the consequences brought on because of the internal contradictions of the free market system.
Jonathan C says
Another element in this is that if you have a smart meter fitted, the energy provider can switch this to a prepayment meter remotely. Therefore they don’t need to take court action to do this because they don’t need to enter the property.
The Don’t Pay UK campaign website warns that the company can disconnect remotely if you have a smart meter, but does say “they’ll first need to have visited your home to do an assessment of your personal situation and the potential impact of disconnection”. But there is no mention of the possibility of remote switching to prepayment – which I imagine is less onerous for the energy provider (although for the economic reasons above, not their preferred outcome) – but could be a serious flaw in the Don’t Pay UK approach if the energy providers do this en masse.
On Ofgem’s site, I can only see statistics for 2020 (in their ‘Consumer protection report’: https://www.ofgem.gov.uk/sites/default/files/2021-10/Ofgem%20Consumer%20Protection%20Report%20Autumn%202021_Final.pdf) showing 67,239 were remotely switched from smart to prepayment meters. I wonder how many vulnerability assessments were conducted in those cases…? And, when the stats are published, if there number of remote switches from smart to prepayment meters has increased
Sara (Debt Camel) says
Yes, I noted this as a potential problem in my previous post on what may happen if you cancel your DD: https://debtcamel.co.uk/cancel-energy-dd-dontpayuk/
My guess is the very large majority of those 67k switches were requested by the customer.
I have asked a few other debt advisers in the last two weeks and no-one has heard of this being used when a customer does not want it. That doesn’t mean suppliers couldn’t change their approach, but we are entering uncharted waters here.
Jonathan C says
“We are entering uncharted waters here” – I couldn’t have put it better myself! And articles like the one you quoted today “https://www.theguardian.com/society/2022/aug/17/two-thirds-of-uk-families-could-be-in-fuel-poverty-by-january-research-finds” make the lack of action by government even more concerning. Zombie government? Even zombies move!
Andrew says
£284 more potentially on electricity bill v £1600 over charging direct debit- it’s a hard choice.
Cancel direct debit force majeure and pay only for actual usage.
Sara (Debt Camel) says
see https://debtcamel.co.uk/energy-dd-is-wrong/ if you think the DD is wrong, not just too high because of the prices.
Dan says
How hard is it!
Monthly reading not sky high estimate
Force Majeure frustrated contract.
Joinder for non DD fees-no thank you – Bills of exchange act 1882
Standing order and be a few pounds in credit and not subsidise energy companies with free loans.
Electricity act 1989 Disconnection of priority customers not allowed Oct-April and self disconnection due to debt not allowed. Payment plan.
Marten Lewis is an Establishment crony
Sara (Debt Camel) says
Bills of exchange act 1882
ah that sounds like you have been reading some wild conspiracy type stuff about debts on the web. I suggest you ignore it.