Should quoting costs to customers as a monthly direct debit amount be stopped?

Chrysalis

Its become very clear on this forum, that the industry has moved in a very bad direction, people only care what their monthly direct debit is, this is wrong in a few ways of course, mainly in that people simply do not understand energy consumption and how their bills are made up.

I think annual usage estimations should be clearly explained, with documentation on what KwH is and how its calculated.
Any prices should only be merely quoted in costs per KwH and standing charges.

There should be no quoted annual cost other than maybe in a invoice fashion showing what was spent the previous year and no quoted monthly direct debit.  In an ideal world fixed DD would suffer a death but its probably here to stay, at the very least we can make it not the dominant feature of quotes form companies and price uplift documentation.

It would initially cause people confusion as they have in recent years been made to understand costs as a monthly direct debit spend, but this is really a correction to force people to educate themselves on energy consumption and charges.

This of course includes ofgem who need to stop quoting silly average use caps, I have never seen a industry regulator as incompetent and detached from reality as ofgem.  Whoever thought that was a good idea I would love to know.  The amount of people I have had to explain that the average use cap is not an absolute fixed cap is astounding, almost everyone I know.

jamei305

All the information has always been on the bills, it's just that people choose to ignore it. Of course this isn't helped by the dumbing-down we've seen over the last couple of decades.

The level of financial illiteracy in this country is shocking, and the media are fully engaged in making it worse. The BBC News homepage won't even say "Unilever" in a headline any more, they have to say "Marmite maker", and instead of "Bank of England raises rates again to fight inflation" they had "Interest rates rise again to counter higher prices". A few years ago they moved stock market indices from the front page to the business homepage and then ditched them to a sub-page.

Sure, maybe lots of people don't know what inflation or a kWh is, but they're never going to bother finding out if such complicated ideas are hidden away from them behind terms such as "rising bills".

tacpot12

I agree the Ofgem price cap mechanism is bad. They should just publish the capped rates and not translate what this rate means for an "average user" because very few people actually are average users. Most will use a bit more or a bit less than the average. 

However, I don't mind quotes being expressed in monthly amounts. Most people budget on monthly amounts, especially as Universal Credit is paid monthly. Ultimately what people are interested in is whether they can afford an expense, and I think most people judge that based on what they can afford per month.  

pochase

The way people only see direct debit amounts as relevant are of course bad, but even if you don't quote it. it will still be there as long as people pay by direct debit.

Does it really make a difference if they are quoted an estimated use of 3600£ or told they have to pay 300£ direct debit per month. As long as people don't pay by a variable direct debit, which most don't know about and many will not be able to afford in winter because they never learned to budget, this is going to continue.

As bad as the monetary quote is, it is better than just telling them they will use xxx KWh. Many are not able to calculate the real cost and what this means. 

Imagine what would happen if people with the April increase would not have received requests for high monthly direct debit orders and/or quotes what they will have to pay. In a few months this forum would be swamped with threads "why do I have suddenly to pay xxx" or "xxxx wants ...."

If you tell somebody you have to now pay 200£ per months they at least wake up, if you tell them gas has risen from 4p to 7p and you use 12000KWh per month many will not realise what it means for them.

I agree that this is not the best way to handle it, and it is somewhat frustrating to see all the threads starting with my DD has doubled, is that correct, without giving any information at all believing this information should be enough, but it shows that people don't realise that more than just an amount is involved. Who is interested in it will have learned already how to calculate with meter readings and rates, for the others it will be hard to educate them.
 

wild666

There was a couple of pensioners talking about the price increases this week in Aldi and when one said he was thinking of getting his gas meter removed as his gas bill was so high I couldn't help myself and said it should be the other way round with the SC at 48p plus and the kWh price at around 28p but he wouldn't have any electric like a TV, fridge or freezer or lighting. He replied I don't put any lights on and go to bed when it's dark or 4 pm whichever was the sooner but he did say he would miss his TV and said he didn't pay for a licence as his wife died in 2020 and he received letters addressed to his wife from TV Licensing which he binned.

Hedgepigs

I don't think quoting DD amounts is a problem - back when you could jump on a comparison site stick in your average usage and see the options in pounds and pence made it much easier than trying to figure out what individual tariffs would actually mean.

I agree the information on the price cap being given as average consumption has not been helpful and just more confusing for many though.

BUFF

Chrysalis said:

  In an ideal world fixed DD would suffer a death 

I disagree with this as I probably use 70% of my gas over 3 months in the Winter & it suits me to average the payment over 12.
I also suspect that those people who are budgeting/spending close to their limits on a day by day basis are probably the ones who would be worst hit by having to pay for their increased heating cost at the time incurred rather than spreading the load over a longer period.

markin

Its fine on a on a comparison site, but the problem is them making poor estimates over the phone and you have to wonder how many are doing it deliberately to keep or gain customer or get them on high fixed deals.

Zandoni

I'd like to see the same standing charge across the whole country which can't be changed. It would then be whole lot easier to compare prices, if we are ever able to again.

Chrysalis

BUFF said:

Chrysalis said:

  In an ideal world fixed DD would suffer a death 

I disagree with this as I probably use 70% of my gas over 3 months in the Winter & it suits me to average the payment over 12.
I also suspect that those people who are budgeting/spending close to their limits on a day by day basis are probably the ones who would be worst hit by having to pay for their increased heating cost at the time incurred rather than spreading the load over a longer period.

But they still pay for it, just in advance instead in summer.  Fixed DD is not a discount,  This actually hurts the poor the most, as the money they lose from paying in advance is proportionally higher for them, I think you meant its bad for those who dont know how to budget in advance, my better solution is below fixed DD in arrears, but still dont advertise as a DD, advertise as unit rates and SC.

I would be more ok with fixed DD in arrears, this satisfies those who are obsessed with fixed DD, whilst not allowing the companies to treat customers as a 0% loan supplier.  So basically an account would never be allowed to be in credit for long (like on credit cards), it would be in debit in winter, and catch up in summer.

Of course bear in mind DD's are now only fixed for 6 months on SVR, as we getting big rises twice a year.  So regardless of the allergy to dealing with variable billing, its here for the foreseeable future.  We will be getting all the "My DD has shot up" threads again in October.

rp1974

Dont see the quoting of monthly amounts as an issue,the almost complete disregard for actual unit and standing charges that apply to you,not an average consumer however clearly is.
The majority of the information needed to make your own choices is readily available,the abilty to understand it seemingly not as readily available.
The price cap nonsense,however well intentioned I find it incredible,almost impossible to believe that many,many people think the price cap is a maximum possible payment amount,not that it is a maximum possible unit and standing charge price.