Energy Companies Allegedly Misuseing Direct Debit Scheme

littletommytucker

Energy companies arent allowed to gain interest on customers credit balances, they would be in breach of there contract and could loose their liscence to trade (but more likely just a hefty fine). I speak to about 50 customers a day calling up with the "im in credit but DD has doubled" line, and allways manually reasses for them. Problem is customers are taking there last 4 bills and dividing by 12, expecting thats what they need to pay...but if they allready been on DD for 6 months, then they should taking there last 2 winter bills, adding the 62% increase onto the Jan Bill, and the 42% increase onto the April bill, and dividing by 6... so at the end of the 12 month plan they will balance at £0.

It makes perfect scence to me that If my previous annual consuption was £1200 pounds, then £100 a month would have surficed, however that was set up in May, and prices went up 42% in July, so i now need to pay £142....and ofcourse you will be in credit at the moment, because your october/november bill is one of the 2 small "summer" bills!???

I understand the initial confusion upon reading about your increase, but I dont understand how after the simple obvious explanation, customers then insist on arguing the toss for 30minutes. I personally just cancell the DD, and reset it again spreading it over 12 months to avoid the argument.

EdInvestor

Mail on Sunday says the companies are sitting on 4bn quid...

http://www.thisismoney.co.uk/consumer/bills/article.html?in_article_id=458209&in_page_id=510&ct=5

SwanJon

EdInvestor wrote: »

Mail on Sunday says the companies are sitting on 4bn quid...

http://www.thisismoney.co.uk/consumer/bills/article.html?in_article_id=458209&in_page_id=510&ct=5

Not read the article, but £4bn!
OK, there are about 25m domestic electricity supplies in Britiain, and 20m domestic gas supplies.
That would mean that on average every single supply was about £90 in credit coming into the winter period, including all PP accounts and other non-DD accounts.
No one anywhere in debt?

Doesn't matter anyway as we'll have athread in March saying that the DD's were all set too low to prevent customers switching supply and it is all a devious plot by the energy companies. (Both arguments have been put forward by the same poster on this forum).

1carminestocky

EdInvestor wrote: »

Mail on Sunday says the companies are sitting on 4bn quid...

http://www.thisismoney.co.uk/consumer/bills/article.html?in_article_id=458209&in_page_id=510&ct=5

If this figure can be proven methinks the energy companies are in deep doodah. Oh, I forgot, the regulator is OFGEM. They'll be fine...:rolleyes:

bristolleedsfan

EdInvestor wrote: »

Mail on Sunday says the companies are sitting on 4bn quid...

http://www.thisismoney.co.uk/consumer/bills/article.html?in_article_id=458209&in_page_id=510&ct=5

And "Bank of Eon will happily sign you up" :rolleyes:


http://www.thisismoney.co.uk/news/columnists/article.html?in_article_id=458227&in_page_id=19&in_author_id=2

SwanJon

Ok, read it.
Salient points:

Nearly 1,000 angry energy customers have contacted this newspaper to complain about the practice.

How many people would actively write in to say they were paying the right amount or too little? Is this a representative sample of DD paying customers?

Direct debits are paid in advance, which means the money can be banked by the utility companies before the gas or electricity is consumed.

Really? I think this is a common misconception. The payments are banked before the gas or electricity is charged, but is is banked before it is used? You move to a new supplier or new home and start using G&E immediately, but don't pay your first DD for a few weeks. That's not before the G&E was used was it?

A survey of the power bills sent in by Mail on Sunday readers suggests that the average direct-debit customer is paying around £110 a month. In addition, the bills we saw are on average roughly the same amount in credit at the beginning of the charging period.

As above, probably not a representative sample, and we would expect people to have built up some credit (especially for gas) at this time of the year, and a one month buffer may not actually be enough.

Added together, this gives the companies about £220 in money up-front. Multiplied by 18m - the number of households in the UK thought to pay by direct debit - the total sum available to the utilities comes to almost £4bn.

So we are back to the dodgy premise that the customers wound up enough to contact the Daily Mail instead of/as well as their supplier are 100% indicative of the DD paying customers at large.

Hmm. pinch of salt anyone?

brysiewysie

bristolleedsfan wrote: »

And "Bank of Eon will happily sign you up" :rolleyes:


http://www.thisismoney.co.uk/news/columnists/article.html?in_article_id=458227&in_page_id=19&in_author_id=2

Of course these articles always sensationalise things.

I can let my team amend a DD to any figure that I agree to but for what reason? To create debt (or additional debt) on an account? To let it get automatically amended upwards again when it's reviewed at the next bill?

How will a customer feel if my team give them the illusion that we'll over-ride a DD increase by £50 or so when it will then get automatically reviewed again in 2.5 months time and go up by even more because they've underpaid for the last 2 months? Customers should have around 2 mths payments in credit on accounts now. Yes they will agree to refund this if asked but the DD will increase significantly more if this is done.

These are the first winter bills coming up since we had substantial price rises in Feb and Aug of this year. For average customers the combined increase is about 55%. When most people use 75% of their energy in the next 4 mths and DD's are only just being amended it means the payment will go up by large amounts, it's simple maths.

Looking ahead I think customers will continue to realise that energy isn't cheap any more and reprioritise finances accordingly. Energy companies do need to have effective Social Tariffs targetted at the right people and customers need to understand that a monthly DD sum does not necessarily represent the cost of their energy at any time.

I think part of this whole education process will involve many customers changing supplier, realising that the DD sum from the supplier they've just left wasn't that far off and then either accept the DD system generally works and/or take energy efficiency to cut their costs.

It's a tough time for many (my family and I included), however I'm afraid to say in the vast majority of cases where I work monthly DD schemes are correct in the figures they produce.

Edit; Bristolleedsfan, this isn't aimed at you, it's a general comment on the whole issue and sensationlist press articles.

1carminestocky

Whilst I am in no way an apologist for the press, I'm glad they are taking the fight to the energy companies at the moment, as OFGEM would appear to be doing sod all of any worth. Lots of 'recommendations' and 'we are looking into to its' but no real action taking place.

BallandChain

This is unbelievable. I've just read this:

http://www.thisismoney.co.uk/consumer/bills/article.html?in_article_id=458170&in_page_id=510

Whose money is it?
You might think a credit balance is your money. But you are wrong. There is no ring-fenced account with all the money paid in advance sitting there. While you are entitled to benefit from over-payments and to ask for a refund, once paid the cash belongs to the energy supplier. In practice, energy companies treat the advance payments as any other day-to-day income and use it to run the business.

What would happen to my money if an energy firm went bust?
Even in the current economic climate, this is unlikely. But there are emergency arrangements under Ofgem rules to transfer customer accounts to a supplier of last resort. However, in such cases any credit balance would not transfer over. Customers would end up as creditors of the business, perhaps only getting back a fraction of their original payment. EDF, for example, says: 'In the hypothetical situation that EDF Energy was left to go into insolvent liquidation, any customers with credits would have to claim as unsecured creditors.'

Cardew

That really is an awful piece of Journalism! Sensational headlines - all accusations, with no proof that there is a scam going on.

This quote from the same article is revealing:

On average paying by direct debit saves seven per cent on standard prices for an average user who takes both gas and electricity from the same supplier, says comparison website uswitch.com. But if you only buy one fuel, the discount can be as little as one per cent.
Scottish Power acknowledges that direct debits help boost its cashflow but says: 'Whilst individual customer accounts may be in credit from time to time, our total customer debt has always been in a debit position.'
Scottish and Southern, says: 'Any suggestion of us keeping monthly payments artificially high is wrong.'
Eon says: 'We do not make a profit from setting direct debit payments.'
But that is not the whole picture. Collecting monthly payments in advance also dramatically reduces an energy supplier's risk of bad debts and the cost of chasing late payers. These benefits alone can be worth up to ten per cent of turnover to an average business. Regulator Ofgem is monitoring the level of advanced payments. It says: 'Suppliers should treat their customers fairly and Ofgem expects them to do so. 'Ofgem would like to consider the information the Mail on Sunday has uncovered on energy suppliers' use of direct debit to see if it gives cause for action by Ofgem or others. However, Ofgem, to date, has received no quantified evidence indicating misuse of direct debit schemes.'

If the companies have increased DDs to make a profit then it will very quickly become apparent by customers being in credit at the settlement date?

The companies deny they are making money from this practice, and they will be in trouble if they are making this money.

Surely if they wanted to make more money from the DD schem they could just reduce the discount they give for Direct Debit