Energy firms face 3 week deadline in review of direct debit hikes

youravinalarrrf

https://www.bbc.co.uk/news/business-61309576

Chrysalis

Beat me to it.

So Ofgem and the Ministers have caught on, fines threatened.

All we need now is Ofgem to promote Variable DD as an option to raise customer awareness.

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"Substantial fines"

So struggling energy suppliers who have raised DDs in an effort to generate some cash to get through another period of selling below what they buy at will have to pay out, making collapse more likely.

Where do Ofgem think the money will come from to pay the fines?

Just make them put the DDs where they should be.

QrizB

facade said:

"Substantial fines"

So struggling energy suppliers who have raised DDs in an effort to generate some cash to get through another period of selling below what they buy at will have to pay out, making collapse more likely.

There are many ways for a viable business to raise capital. Borrowing it from their unwitting customers should not be one of them.

MattMattMattUK

Chrysalis said:

Beat me to it.

So Ofgem and the Ministers have caught on, fines threatened.

All we need now is Ofgem to promote Variable DD as an option to raise customer awareness.

I really do not see this as a solution. Whilst it is fine for people like us who are competent at budgeting it can be evidenced by many of the people raising issues on here, commenting in the media etc. that the finances would be even more of a mess if they had to account for a payment that varied significantly throughout the year. There is no issue with fixed Direct Debits as a concept and indeed for most who are on them they work well, yes some people end up building up large credits or debts but there are methods in place to manage those.

With regard to the article itself, some suppliers have undoubtably raised the monthly payments too high for some customers, but many of the complaints of hugely increased Direct Debits are not actually an issue with the amount being increased excessively,. but people not understanding the significant increases in energy costs we have already had, combined with the Direct Debits being raised to cover the next twelve month period which will include a 25-50% increase in October. 

MattMattMattUK

QrizB said:

facade said:

"Substantial fines"

So struggling energy suppliers who have raised DDs in an effort to generate some cash to get through another period of selling below what they buy at will have to pay out, making collapse more likely.

There are many ways for a viable business to raise capital. Borrowing it from their unwitting customers should not be one of them.

One has to an extent question the ongoing viability of the energy suppliers, in theory they could return to profit after the recent rise in the price cap, however many are at best likely to break even and they will be operating on 0-2% profit margins until at least late next year, probably longer. When you factor in he impact of the last year it will likely be 2024-2026 before they recover the losses they made. If the government does not bring more flexibility or shorter review periods into the price cap system then even some larger players may decide that it is not worth remaining in the sector. 1-3% net margins are manageable when you have a reasonable volume of business and you know you can maintain those margins, but when the government continually chains them up a low tide and tells them to hold their breath and wait out high tide you have to question if that really does remain a viable business long term. 

StartledJesus

"We are also seeing troubling signs that some companies are reacting to these changes by allowing levels of customer service to deteriorate," he wrote.

Just a very slight understatement, there, mentioning no names, British Gas, EDF, Shell.

Not defending the suppliers in any way, but, no doubt, they will moan that this is due to being ‘lumbered’ by Ofgem with thousands of orphan customers, under the SoLR process. Conversely, they should have the wherewithal to adapt accordingly, rather than trying to do things on the cheap. 

facade

QrizB said:

facade said:

"Substantial fines"

So struggling energy suppliers who have raised DDs in an effort to generate some cash to get through another period of selling below what they buy at will have to pay out, making collapse more likely.

There are many ways for a viable business to raise capital. Borrowing it from their unwitting customers should not be one of them.

I agree that they are in the wrong, my point is fining them will only make things worse, and we would just end up paying the fine anyway.

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MattMattMattUK said:

With regard to the article itself, some suppliers have undoubtedly raised the monthly payments too high for some customers, but many of the complaints of hugely increased Direct Debits are not actually an issue with the amount being increased excessively,. but people not understanding the significant increases in energy costs we have already had, combined with the Direct Debits being raised to cover the next twelve month period which will include a 25-50% increase in October. 

In my case, my DD has increased 100%, and judging by this months figures, it might not be quite enough.

My overpayment in April was only £25!. Based on last years consumption, it will put me on an underpayment of £65 pcm  throughout the Winter. (I'm on a fix), and an overpayment of £75 in August. 

With the £400 loan it will work out, but I'm hardly subsidising Octopus.

daveyjp

I know for many its a simple calculation to work out the estimated annual cost divided by 12 to get a monthly debit, but for just as many it isn't.

Do suppliers have to provide the full analysis of how the direct debit is calculated?

facade

I think Ofgem should review how they announce price rises in future. I suspect the majority of the "problem" is people not understanding how a 54% price rise can make their DD double. (Obviously it can't- but the price rise isn't 54% for most people.)

If they'd said gas increases by 100%, electricity by 33%, standing charges by 50%, and that households will be paying more than £700 extra a year, in some cases a great deal more, we might not have as much confusion.