Is this how they calculate Direct Debit payments?

vonsworld

Hi

I assume that when energy companies calculate your Direct Debit monthly payment they base this on your estimated usage, with a view that you should have zero credit on the 1st April the following year? So that you can then build up credit during the summer before the more expensive winter months.

Is this correct please?

My energy supplier (Shell) are telling me I'm paying a little too much at the moment, but this is a farce. Since they are using the current tariff and my estimated usage until April 2023. When we all know prices are likely to rise again by 20%+ in October. So if you can afford it, building up extra credit now is probably a good idea.

Mstty

Depends when your year starts with them as an example.my year starts 3rd October as that's is when I was moved to Eon Next when Symbio went bust.

If you submit regular readings or have a smart meter that does so for you the direct debit will be based on actual yearly usage unless it's your first year and you haven't corrected estimates with actual readings.

Ultrasonic

They base it on estimated annual usage, but I'm not sure about your 1 April assumption.

Financially you're better off keeping more of your money in a savings account and earning interest on it, rather than overpaying to your energy supplier. The only reason to do the latter is if you feel it will help you with budgeting. Well, or unless you have a current account that gives you cashback on payments to energy companies and you haven't hit the maximum payout.

luvchocolate

Shell also want me to reduce payments..my bill this month was exactly my dd and I'm only £60 in credit. 
A friend with Octopus only want her to be in credit by £25.

victor2

I calculate what my costs would be until the end of the current contract if my usage was the same as a year ago, then get my DD adjusted to match that. In theory I'll be close to a zero balance at the end of the contract. Currently on a two year fix, so I have to look back a bit further to predict my usage. Haven't decided how I'll deal with the £200 credit we're supposed to be getting in October yet either - that could throw my calculations out! 

OldBore

Our supplier EDF have at last admitted in writing that they do not follow the classical method of calculating Monthly DD Payment amounts i.e. from your anniversary account take the account balance and add the projected charges shown for the next year, then divide this total by 12. This should leave a balance of zero on your account at the end of the year.
But what EDF admit to doing is , and I quote "To explain further, we have advised you that the target balance after 12 months was £0, which was not correct. In fact, we aim to have accounts in excess of at least one month’s usage to protect against spikes in usage, or as a small buffer in case there are financial issues, and this is an approach we take with all customers.

Your balance at the time of the direct debit review was £167.69, and we were forecasting monthly charges of £93.05. The suggested payments of £89.02 were then derived on the basis of achieving a target balance of £119.28, slightly in excess of one months balance. We have a slightly different figure to you as our estimates extend beyond 2 decimal places."

I think this is very sharp practice but I feel all major suppliers do this and no one, especially Ofgem, seems to care.!!!

 

victor2

You have resurrected a very old thread. Better to start your own if you want it to be discussed.

bob2302

vonsworld said:

My energy supplier (Shell) are telling me I'm paying a little too much at the moment, but this is a farce. Since they are using the current tariff and my estimated usage until April 2023. When we all know prices are likely to rise again by 20%+ in October. So if you can afford it, building up extra credit now is probably a good idea.

Shell Energy is part of Octopus; if you can use the Octopus app you can set a higher value yourself.

QrizB

bob2302 said:

vonsworld said:

My energy supplier (Shell) are telling me I'm paying a little too much at the moment, but this is a farce. Since they are using the current tariff and my estimated usage until April 2023. When we all know prices are likely to rise again by 20%+ in October. So if you can afford it, building up extra credit now is probably a good idea.

Shell Energy is part of Octopus; if you can use the Octopus app you can set a higher value yourself.

Vonsworld posted that three years ago, I suspect they've solved their problem by now.