Debt Camel

Answers to questions about debts and credit ratings - in plain English!

  • Home
  • Cost of living ▾
    • Ofgem – no useful help for impossible bills
    • Cancel your energy DD?
    • Can’t pay your IVA?
    • Help if you can’t pay bills & debts
  • Refunds ▾
    • Morses looks at a Scheme
    • Amigo – make a claim now
    • Overdraft refunds
    • Large loans & car finance
    • Catalogues & credit cards
    • Payday loan refunds
  • Debt solutions ▾
    • Payment arrangements
    • Debt Management Plans
    • Debt Relief Orders
    • IVAs
    • Bankruptcy
    • Compare 2 solutions
  • Money ▾
    • Budgeting & Saving
    • Credit ratings
    • Mortgages
  • Latest ▾
    • All posts
    • Debt news & policy
    • A reader asks…
  • About ▾
    • About Debt Camel
    • Media
    • Contact

Ofgem names energy firms who must improve their Direct Debit setting

Ofgem's review into how suppliers set direct debits has named and shamed the 6 worst

Ofgem has been investigating how energy suppliers set customers’ direct debits. The energy regulator has found:

  • more than 7 million consumers on a Standard Variable Tariff (SVT) had their direct debits increased between February and April 2022;
  • direct debits went up 62% on average;
  • half a million households had an increase of more than 100%.

Ofgem has told 6 energy suppliers to take immediate and urgent action, after identifying a range of problems in the way they set direct debit payments.

MSE’s survey

Ofgem’s investigation into the way firms set direct debits for their customers follows what MSE has described as widespread complaints from customers.

MSE’s report on its own survey is here: 30% of British Gas, Octopus & Shell Energy customers say their direct debits have DOUBLED. This survey was large scale, with over 40,000 respondents, but it was self-selected so it is inevitable that people who felt they had been unfairly treated are more likely to have responded.

The 6 firms where Ofgem has found moderate or severe weaknesses

Often regulator announcements can be bland, but in this case Ofgem has named the specific firms involved. It found that:

  • TruEnergy and UK Energy Incubator Hub, have a “severe weakness”;
  • Ecotricity, Good Energy, Green Energy UK and Utilita Energy, have a range of “moderate” weaknesses.

Those firms now have to submit an action plan to Ofgem within two weeks to set out how they will take the required actions.

Six further firms were found to have “minor weaknesses”: Bulb, E.ON, Octopus Energy, Outfox the Market, Ovo, Shell and Utility Warehouse.

Ofgem decided that four firms do not have significant problems: British Gas, EDF, Scottish Power and SO Energy.

A review of all accounts with very large increases

Ofgem says it has not found evidence of unjustifiably high direct debits. But it is concerned that 8% of customers, about half a million, have seen their direct debits increase by 100% or more.

It wants to ensure there is good reason for these large changes. This could include the customer coming off a low fixed rate, arrears on the account or a recent meter reading showing an increased energy use.

It has therefore decided to require all firms to review the accounts where direct debits have doubled.

What can you do if you think your direct debit is too high?

The aim of the direct debit is to charge you the set amount every month, so the direct debit smooths the higher energy usage in the winter with the lower usage in the summer. This makes it easier for you to budget and prevents you from getting large arrears in the winter.

So it’s normal to build up credits on your account during the summer. These credits should now be higher than they were last years because energy prices went up last October and this April.

You can challenge the direct debit amount if you think it should be lower.

Your supplier should be able to explain how they have calculated this amount. If this is based on meter readings, check that these are accurate.

It’s a good idea to start to take monthly meter readings from now on and submit these to your energy firm. Take a photo of the meters. If you have decreased your energy usage in order to save money, these monthly readings should start to show that your energy usage is dropping from what it was last year.

Although the direct debit system can seem opaque, it is the cheapest way to pay for energy. If you cancel it and pay on the quarterly bills, these will be higher. As will paying with a prepayment meter.

With higher prices from October, perhaps just live with a DD that is a bit high

The current average energy bill is about £2,000 a year.

We are now close to the point where the October price rises will be set. The best estimate is now expected to be £3,244 a year from October, then this will increase again to £3,363 a year from January 2023. So the October prices are thought to be going up another 60% or more.

So this may not be a good time to get your Direct Debit reduced. If you can build up a large credit now, this winter after the next price rise, will be easier.

What if you have accumulated arrears already?

If you are already in arrears on your account, your supplier will want to set a direct debit that covers your ongoing energy usage and with an extra amount towards clearing the arrears.

Energy bills are priority debts. If you have non-priority debts such as credit cards or loans then you may need to pay less to those. That will let you afford to pay more to your energy bills.  See Can’t pay your bills & debts? What help can you get? which looks at your general options.

Citizens Advice’s What to do if you’re struggling to pay your energy bills page covers the options for your energy bill. If your supplier won’t agree to a payment you can afford, contact your local Citizens Advice for help.


Should you support DontPayUK?

Ofgem – no useful help with energy bill crisis

Problem debts under £30,000 and renting? Look at a DRO

Could a Debt Relief Order help you?

July 13, 2022 Author: Sara Williams Tagged With: energy crisis

Comments

  1. BRIAR HARLEY says

    July 13, 2022 at 5:37 pm

    Thanks for explaining things so clearly. It’s good to hear that Ofgem is taking the rise on DDs seriously and that companies have been named and shamed.

    Reply
  2. shmaila says

    July 13, 2022 at 11:48 pm

    Hi Sara
    I came across this panel accidently and found you, hope you will guide me as I am in some situation now.
    long story short, I had credit card wit Capital one since 2013,starting limit wit 1200 then they automatically increased to 1800.
    In Aug 2020 I ad very serious issue n my married life and with my job s nearly my situation was dying and i was under depression and taking some medication to relax myself with prescription of doctors, as it was pandemic time and I lost my job, I phoned them and explained my situation and ask to freeze my card for some time and request them that i will resume payments within some months once situation became normal, lady was agreed , then suddenly the started sending me letters that you missed payments contact with us ,as I mentioned I was not in god health at all and in my mind I already inform them so they must be routine letters , so they defaulted me in Feb. 2021,. any suggestion what should do , as this is the only one bad credit history in my entire life, and now I am wiling to buy house but , just because of this default I cant.
    I reached ombudsman company but not good response.
    I have balance of £1300 which I am paying on £20 P/M now. anyway if I clear balance can I take out default from my credit report? or another way to remove default from my credit file
    Thanks x

    Reply
    • Sara (Debt Camel) says

      July 14, 2022 at 8:08 am

      In Aug 2020 a credit card lender should have given you a 3 month payment holiday (but interest would have continued to be added) which would not have harmed your credit record. You could then have asked for a second 3 month payment holiday. It sounds as though you didnt ask for this – I am afraid those letters were not routine.

      If you clear the balance now, this will not remove the default – that will stay on your credit record for 6 years from Feb 2021.

      But it is possible to get a mortgage at an OK rate with a high street bank after a a while. A rough rule of thumb is that the default has to be 3 years old and to have been repaid for at least a year, 2 years is better. So if you pay this default now, then you may have a chance of a mortgage in 2024.

      PS I will move this thread to https://debtcamel.co.uk/get-rid-of-a-default/ in a day or two as that page is more relevant.

      Reply
  3. Lucy says

    July 14, 2022 at 8:40 am

    I am with Octopus energy and my dual duel DD has gone from £90 p/m to £268 p/m. I am still using the same amount of energy. I tried to adjust the DD figure and they told me I couldnt change it because it would be lower than what they have said it should be. Lets hope they take a look into it and let me lower it!

    Reply
    • Sara (Debt Camel) says

      July 14, 2022 at 11:50 am

      That sounds a very high increase unless the £90 was for a fixed rate? I suggest you don’t wait but go back to Octopus and ask them to explain how they have calculated this figure.

      Reply
  4. Graham O'Malley says

    July 14, 2022 at 9:12 am

    Hi Sara,

    I wrote this a couple of weeks ago https://medium.com/adviser/utility-debt-and-unaffordable-direct-debits-944d10e7dd2a

    It might help, it might not if firms are still so intractable. It is aimed at advisers but hopefully your readers will find it useful too. It covers the rules you might use to argue for lower DDs. As you say, just cancelling is tempting but costs more. Building up a credit might be helpful for October onwards but some of the increases are not justifiable looking at Ofgems name and shame.

    All the best to everyone out there

    Graham

    Reply
  5. Lynn says

    July 14, 2022 at 12:16 pm

    Hi
    I’m in the same situation as Lucy says
    I am with British Gas
    My bill rose from £133 a month to £302.70 they have just automatically lowered it after refusing for a few months to £263.43 which I still think is too much money a month- especially if another price hike is coming !
    I have smart metres so they don’t have to estimate my usage.
    Does this sound right to you ?
    Thanks you in advance
    Lynn

    Reply
    • Sara (Debt Camel) says

      July 14, 2022 at 12:24 pm

      Were you on a fixed rate before? When did that end?

      Reply
  6. Lynn says

    July 14, 2022 at 12:32 pm

    My fixed rate ended at the end of last month
    I was transferred from peoples energy when they went bust

    Reply

Leave a Reply Cancel reply

You have to agree to the comment policy.

Subscribe to Debt Camel

Get an email when a new article is published:

  • Facebook
  • Instagram
  • Twitter

Recent articles

  • Debt news – 14 August 2022
  • Ofgem says don’t cancel direct debits – but has no good alternatives
  • Should you cancel your direct debit if you can’t pay your energy bill?
  • The Money Platform takes payments for loans already repaid

Help with your debts

Recommended places for debt advice

About Debt Camel

This is the personal website of Sara Williams.

More about Debt Camel.
Privacy policy
Comments Policy

 

Copyright © Debt Camel 2022