Octopus want an upfront payment - is this normal?

DaveTheRave100

I've been a customer of Npower for around 6 to 7 years now (I joined them when I moved into my house and I've just never bothered shopping around or comparing prices since). So I've finally decided to switch. The other big suppliers like british gas and the rest all seem to be quite similar in price, but I've noticed a lot of the 'small' companies seem considerably cheaper. I was quoted £88 per month from Octopus energy and they seem like a decent company, but they ask for an upfront payment and it kind of put me off. Other small companies seem to do the same thing (like Bulb and a few others). Is this normal practice? I really want to switch but I was just a bit concerned - I've never been asked to pay upfront for energy before, or any other utilities for that matter. Am I just being a bit paranoid?

Thank you in advance to anyone who can help!

JohnB47

DaveTheRave100 wrote: »

I've been a customer of Npower for around 6 to 7 years now (I joined them when I moved into my house and I've just never bothered shopping around or comparing prices since). So I've finally decided to switch. The other big suppliers like british gas and the rest all seem to be quite similar in price, but I've noticed a lot of the 'small' companies seem considerably cheaper. I was quoted £88 per month from Octopus energy and they seem like a decent company, but they ask for an upfront payment and it kind of put me off. Other small companies seem to do the same thing (like Bulb and a few others). Is this normal practice? I really want to switch but I was just a bit concerned - I've never been asked to pay upfront for energy before, or any other utilities for that matter. Am I just being a bit paranoid?

Thank you in advance to anyone who can help!

I've used the smaller companies for some years now and I find that as soon as I sign up to them, they take a Direct Debit Payment.


If that is what you mean by upfront, then it's normal in my experience. I thought all energy companies did that.


Or do you mean something else?

Broadyx

I am due to join octopus on the 4th March and they take the first payment on the 4th March - they say it is to start your account in credit, however I think it just means you pay in advance, rather than in arrears. I can't see anything wrong with it though. unless i have misunderstood their logic.

DaveTheRave100

Thanks @Broadyx. In my experience if I signed up on the 10th Jan, my first DD payment would be due on 10th Feb. But then again it has been a few years since I've done this sort of thing!

cranford

These smaller companies don't have deep pockets and cant stay in business if they supplied energy upfront. If they did this they would have to borrow from their banks (if they even could) and charge you more for the energy. So you have a choice - pay up front and pay less for your energy or pay later and pay more for your energy.
I am with a small co and must have saved over £300 in the last two years so loosing £2 interest on an upfront £100 payment is a no brainer.

grumpycrab

If you join some small companies in the winter, not only will they charge you up front (IE 1 month in advance) but they may charge you a higher direct debit for the first few months and a lower direct debit for the remainder of the term (we're talking fixed deals here). The comparison sites have been slow to notify customers of this (although it is really up to customers to check the small print of any new supplier).
In the future there may be options to pay 1 year up front which could be a large amount but large discounts may compensate. ofgem protection of this kind of payment must be checked of-course.

JohnB47

grumpycrab wrote: »

In the future there may be options to pay 1 year up front which could be a large amount but large discounts may compensate. ofgem protection of this kind of payment must be checked of-course.

Ofgem recently stopped Eversmart marketing a tariff that included a years payment up front, so I don't think they are keen on this sort of thing.

Neil_Jones

Up front payments work in other sectors but for lesser amounts (ie the Line Rental Saver options which are typically somewhere around £200), whereas in energy an equivalent can be closer to £1k for average use. I suppose Ofgem were worried about people over stretching themselve as not everybody is able to get access to that sort of money quickly.

IIRC the Eversmart Deal was variable as well so there was nothing to stop them taking a grand and then jacking up the prices and asking for more money.