direct debits - interest free loans to our energy suppliers?

in_spired2

Apologies if this has been asked before.  for the past few years, I've been paying around £100 per month and on average twice a year I am given a £150 refund... similarly my mum.. when she signed up for her supplier, they suggested £100 a month but charged her around £150 a month, and roughly twice a year she gets > £150-200 refund. (we have different suppliers)  My dd has been increased to £150 a month (I'm on a 2yr fixed tariff which doesn't end until May 31st this year) hers has increased to nearly £200 a month - she was on the variable tariff which was an average price offered by most suppliers for the last year afaik.  We have both clearly been overpaying. I am electicity with gas boiler for heating/hot water, she is all electric with ASHP i think.

Are direct debits the best way to go atm?  I believe way back, some of the cheaper tarifs were only available to dd customers?.  with the current situation would it be better for folks who are able to budget, to "PAYG".  Our overpay during the summer plus the additional overpay in general might be better off in a savings account where we are earning interest rather than our suppliers being able to invest our money.  For my mum, I looked at last years usage, and would estimate that on the new charges she would actually be paying £130 spread over the year, NOT nearly £200.  hence my question for those of us who can budget and/or in particular are regularly getting refunds (no interest!) from our suppliers.  We, like many others, are both trying to be a little more frugal/thoughtful in our usage now, switching off unused appliances etc.  thoughts?

Gerry1

Anything other than DD tends to be more expensive.  Variable DD may be the answer: you pay only for what you've used, just as with a petrol pump.

It avoids the problems of catch up bills because the DD was set too low and failed to cover the actual use, e.g. if meter readings were estimated.  Similarly, it helps to prevent Ponzi schemes causing companies to collapse and the costs of failure met by all consumers being hit with higher standing charges.

However, Variable DD does mean big bills in the winter and smaller ones in the summer, which may not suit everyone.  It's often not promoted so you may have to chase your supplier.

BUFF

If you have accurate figures for actual annual usage then you ought to be able to more accurately determine what a monthly DD should be (there is always going to be some difference between estimated & actual usage each year due to different weather year to year but you should be able to get close).

If you are on a Fixed Rate tariff until the end of May & you were already overpaying (such that they rebated you each year) unless your usage has changed dramatically there is no legitimate reason for them to have changed your DD already.

Mobtr

If this was your annual review, they will have taken into account that your tariff ends at the end of May and you will then go onto the standard variable which could see your prices more than double if you’ve been on a low fix for the last 2 years. That and the probability that they will rise again in October. Paying a bit higher now will cushion that for the rest of the year otherwise you may see your direct debit more than double later in the year 

[Deleted User]

DD payments are just payments made on account from which actual charges for energy used are deducted. There is no question of under or overpaying as such. Monthly DD payments have a role in keeping energy prices down, as well as providing consumers with a form of predictable payments in normal times.

If all energy consumers moved to retrospective billing then over just one month in Winter when, say, an average monthly electricity and gas cost was £150 and if the supplier had 1Million consumers then it might need to borrow £150M to service those consumers. Suppliers pay their suppliers for the energy that they supply to us in advance of supply in 30 minute settlements. Any money borrowed to maintain cashflow would come at a cost which would have to be passed on to consumers in the form of higher bills.

I am not saying that DD payments are not open to abuse by suppliers: they are. Rolling back the clock to 3 monthly billing in arrears for all consumers would had just put up the cost of energy.

Olinda99

Loans to companies yes

Free - not necessarily. OVO pays 3-5% on in credit balances for example.