Question about DD level

uptomyeyeballs

This month i've changed supplier of gas/electric (to Scottish Power), and my DD payment will be set at £42/month, which will exactly cover my 12 month historical usage. However, by the time April comes round, my balance will be around £75 owed. I'll not get back to zero until August 2011.

I know suppliers like their balances to be £0 owed in spring. Should I expect them to try to raise my DD to about £50/month to enable this April zero, or will they realise by August 2011 i'll owe them nothing and leave it at £42/month?

Maybe the Scottish Power representative could answer this for me

KimYeovil

As you suspect most suppliers will increase it for it to be zero in April - they will not extend it to August. As to when they will raise it, that is the problem - it would probably be best to request an immediate increase yourself now rather than wait three or four months for the next bill when that later increase would have to be even higher.

But it does vary by supplier - and the difference may not be large enough to trigger an increase.

uptomyeyeballs

By very rough calculation it would need to go up about £8 a month to cover it. Once I get on an April-March cycle, it would be fine, so maybe i'll just make a one off payment to ensure it stays at £42/month until April 2011.

Scottish_Power

Hi uptomyeyeballs

If you know exactly what you are using and you have calculated that by setting your monthly payment to £50.00 you will break even by April of next year, I would give us a call/email to request this change now.

I have said previously on this forum that reviewing your Direct Debit payments from April to March is a good option as it allows customers to build a credit to be used for the higher winter consumption. This way you are not caught out by cold winters where consumption drastically increases and then your playing catch up. If you know what you use over a 12-month period and you start your payments from April with a zero balance on your account, you should not have to alter your payments throughout the year unless consumption changes or the unit price changes.

Hope this helps. Let me know if you have any further questions.

Kind Regards

Colin @ ScottishPower

uptomyeyeballs

I reckon £50/month will result in a balance of zero +/- £10 by April 2011.

So if I pay £50 until April 2011, then £42 from then until August 2011 (my correct average monthly usage), I will have actually paid Scottish Power £560 in 12 months, even though I will only have used £504 worth of energy over those same 12 months. I will have a £56 credit on my first anniversary. This actually more than wipes out the monthly payment saving I thought I was making by switching in the first place. :rotfl:

If I pay £42 for 12 months, my payments will have exactly balanced my actual usage, which is what the comparison sites tell us. Usage is based on annual figures, but energy companies insist on an arbitrary date that they reckon the figures should have zero balance. I'm actually going to be paying more per month from now until April, for the service I'm moving to, when the tariff is actually cheaper than the one i've moved from. Quite bizarre!

This type of thing undoubtedly catches people out when trying to calculate monthly payments, and results in the inital payment appearing to be wrong/too low, or even a big deficit to build up if their original DD is not changed, with payment levels swinging wildly as the energy company then makes changes to try to balance the books. It's the 'zero in April' rule that makes a mockery of the calculations for the consumer and can result in massive hikes in DD payments. My own usage is low, but would still result in me being £70 in arrears, even when I accurately know my 12 month figures. Others could be much worse off.

I think i'll make a one off payment to allow the balance to be zero in April, then £42/month DD will be right all the way for the next year, all things being equal (and is what I budgeted for in my original calculations).

brewerdave

Just for info, I have a similar situation with EON,having switched last September. I organised my DD payment to break even after one year (by end of this month).
But I have been assured by the eon rep on this forum that they will not carry out the account "review" until April 2011 when they have (more than) a full year's worth of consumption info.

Scottish_Power

Hi uptomyeyeballs

You have mention that you will be paying more for the service you are moving to when the tariff is actually cheaper. If you use £504 of gas/electricity over 12-month then that is what we charge to your account. If you are saving, say £50 from the switch, you would have been charged £554 for the exact same amount of gas/electricity. The fact that you are looking to manage your payments from April/March means that you are hoping to build a credit balance on your account come August time which will then be put towards your winter consumption and will thus help your monthly payment remain level throughout the year.

If you pay £560 in the 12-months as you are planning to do, you will have a credit balance of £56 on your account if you are only charge £504.00 for 12-months consumption. With your previous supplier, this credit balance would be £6.00 (if the reduced tariff saves you £50.00 over the year).

It is the charge being applied to your account which is important. If I was using £500 over a 12-month period, this averages out at £41.67 per month. I would not want to pay £41.67 per month for my Direct Debit and would rather round this to £45.00. Over 12-months, I would therefore pay £540.00, but my account would only been charged with £500.00.

What I am trying to say is that if you have been advised that you have transferred onto a tariff that saves you £50 over the year, do not try to calculate this saving based on the payments your going to make in the first 12-months (especially as your looking to change your annual cycle) and rather the charges being applied to your account within the first 12-months (based on accurate meter readings of course).

I hope this helps. Let me know if you have any questions.

Kind Regards

Colin @ ScottishPower

uptomyeyeballs

Hi Colin, thanks for coming back.

I fully appreciate what you're saying. I know you're not overcharging me. What i'm saying is, when I signed for a cheaper deal, my monthly payments based on my usage were going to be £4-5/month less (according to comparison sites). That was my motivation for switching, to pay less per month. Now, to arrive at a zero balance in April, I have to actually pay more per month than I was before I switched.

Although you say don't look at it over the first 12 months (and i'm intelligent enough to know what you mean), that's exactly how people will look at it, and then they'll find the supplier will have to hike up the payments even higher than the tariff they've just switched from, because they'll have been 'underpaying' to meet April zero (unless of course they voluntarily pay more per month until April).

Not a satisfactory situation for anyone trying to pay less per month. Even if you accurately know your annual usage, you MAY end up with higher outgoings until you reach April Zero.

KimYeovil

uptomyeyeballs wrote: »

I fully appreciate what you're saying. I know you're not overcharging me. What i'm saying is, when I signed for a cheaper deal, my monthly payments based on my usage were going to be £4-5/month less (according to comparison sites). That was my motivation for switching, to pay less per month. Now, to arrive at a zero balance in April, I have to actually pay more per month than I was before I switched.

But that is not the agreement (nor is it the promise of the comparison sites) at all - you do not agree to pay less per month. That may be what you want but that is no longer offered. You will, of course, after April be paying even less than one-twelfth of your expected annual spend.

uptomyeyeballs

KimYeovil wrote: »

But that is not the agreement (nor is it the promise of the comparison sites) at all - you do not agree to pay less per month. That may be what you want but that is no longer offered. You will, of course, after April be paying even less than one-twelfth of your expected annual spend.

Incorrectly set DD payments are one of biggest annoyances with utlilty companies. I'm not saying the comparison sites guarantee anything, and you know i'm not. What I am saying is that they lead the consumer to think they'll be paying less per month, but it ain't necessarily so, and could lead to people's DD being hiked when they think they've accurately calculated what they'll need to pay to cover their 12 month usage, when in fact the 'Zero in April' calculation !!!!!!s it all up, and their immediate monthly outgoing may end up larger than before they switched.

Scottish_Power

Hi uptomyeyeballs

I know exactly what you mean. Customer's tend to focus so much on the monthly Direct Debit payment to work out who is the cheaper supplier, rather than actually work out who is going to charge less over a 12-month period. I fully appreciate that times are hard and that a lot of people want to lower their monthly outgoings a much as they can.

If you were to do the same calculation with each supplier prices so that from April (starting with a zero balance) you worked out what monthly payment you needed to make to cover your annual consumption, you should see how much you can save.

Once you have done your figures, it can be put in simple terms, e.g. do I want to be charged £550 for 12-months consumption or do I want to be charged £500.00 for the exact same amount of consumption.

Let me know if you have any other thoughts on the matter (its a very popular discussion).

Kind Regards

Colin @ ScottishPower