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Gas and Electric switching.A conspiracy?
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After receiving my last Gas and Electric bills of 2005 I received refunds from both for what I thought were relatively small amounts(£75 gas + £60 electric)I find now I have been billed for the winter months I am owing them money for both utilities. I always thought the point of paying a direct debit was so that the amount would even out over the course of the year and the amount I paid would equal roughly the amount that I use. It would also seem that a lot of people on these boards who are considering switching find that when it comes to it they find it prohibitive because of the size of the last bill that has to be cleared before switching. So my question is, Do you think that utility companies try to keep Direct debits low so that switching is out of the question for a lot of people, or are they kept low to entice people to switch??
Either way they seem to be playing us like fools!!!
Either way they seem to be playing us like fools!!!
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sammyy wrote:After receiving my last Gas and Electric bills of 2005 I received refunds from both for what I thought were relatively small amounts(£75 gas + £60 electric)I find now I have been billed for the winter months I am owing them money for both utilities. I always thought the point of paying a direct debit was so that the amount would even out over the course of the year and the amount I paid would equal roughly the amount that I use. It would also seem that a lot of people on these boards who are considering switching find that when it comes to it they find it prohibitive because of the size of the last bill that has to be cleared before switching. So my question is, Do you think that utility companies try to keep Direct debits low so that switching is out of the question for a lot of people, or are they kept low to entice people to switch??
Either way they seem to be playing us like fools!!!
I agree with your point about refunding relatively small sums being pointless, especially as tariffs inevitably rise in the following year.
However if you read through this forum you will find many posts where people bitterly complain that the utilility companies are holding on to their money. Some even see that they are in credit half way through the billing cycle and demand a refund. A no-win situation for the utiliity companies.
IMO there is no doubt that major reason Utility companies fix direct debits unrealistically low is to entice people to switch. The comparison companies don't make any commission unless the punter switches.
From the utilities companies perspective it is not a problem if the punter runs up a sizable debit balance in the first year. As you say it locks them into the company and, with interest rates being low, the financial penalty to the company is not great.
I am convinced that many people simply do not understand the Direct Debit system and think it is like Hire Purchase payments(or Staywarm) i.e. pay £xx per month for 12 months and that is it. So if they are paying Company A £50 a month and Company B lures them with an offer of £40 a month they genuinely believe that the cost of their gas/electricity/water will be £120 pa less.
That even applies to some people on this forum, who at least take an interest in costs. I dread to think of how many of the general public are in that position.0 -
Consider gas as this is a easier to understand if this is how you centrally heat your home.
I use 6+ times more gas per month in Feb than I do in in Aug. Rather than pay them 6 times more in Feb, the gas companies average this usage out over a year to ease the pain. At the end of a year's usage from whenever you signed up to them they calculate the total amount you have used and either pay you back your overpayment or take it into account for the next whole year - therefore your averaged monthly payments will be slightly less for the next year.
Your winter bill you mention should tell you that, even though you are in debit, you need to take no action due to the above smoothing. Over the coming summer your bills will be lower and you will end up even - if their assumptions on your usage are correct ie your actual usage matches it, and their tarriff remains the same.
This is all being thrown into uncertainty as utilities are currently increasing their tarriffs every few months. The only way to counter this is to calculate the costs of another supplier from a comparison site over a whole year, including incentives eg 1 month free.
If this yearly comparison shows you will save then change suppliers. Martin will try to give you a steer as to whether it is worthwhile in his monthly money tip email. This is a bit of a lottery at the moment!
I change as soon as one company puts up its prices and have gone back to a previous supplier even a few months later. This is costing them a fortune in administration costs, but not me as the cheaper supplier over a year will normally win unless a sign up incentive from the supplier is offered. I am not aware of any.0
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