Why in UK the DD amount is constant figure?

Chrysalis

agentcain said:

There's a simple solution to the FMDD issue from the perspective of losing credit. The payments could go into a protected scheme like deposits. Even in the case of a company going bust, this money exists and is returned. I don't see the argument of "raising standing charges to protect credits" holding water then, as it never should. I'm not sure why people are ok with this. 

There's no incentive then to raise DD more than needed and at the end of the year or even better on April, after winter's done, any balance could be returned in whole automatically.

Indeed I proposed this a few times myself, the fact such a scheme already exists for deposits means its already known its viable.

Chrysalis

Ultrasonic said:

oliverbrown said:

Ultrasonic said:

Of course they do and, as I wrote in my original reply to you in this thread, this is what should be addressed rather than changing the default payment method.

Address it by getting Ofgem to monitor the FMDD amounts of millions of customers? Good luck with that.

I haven't actually said anything about how exactly this should be addressed but in the first instance let's see how the energy firms respond to the recent OFGEM compliance reviews relating to this.

Even if nothing changes I'm unconvinced that your 'solution' wouldn't be worse than the current problem though. VMDD is guaranteed to give much lower bills over warmer months and higher bills over colder months, as opposed to the issue of overly high estimated DD amounts affecting some people. Even those who do overpay will ultimately be OK on the energy front as if/when the customer struggles to pay and the account is properly reviewed then it should be resolved. Which is not to say there isn't still an issue of what a customer may have previously gone without to pay the higher amounts, or the stress of doing so.

Their response will likely be in the form of a threat.

They will state the free cashflow allows them to supply lower prices, they will probably threaten to withdraw the current DD discount unless the government backs off.

The response to that by ofgem if they have the balls would be to make fixed DD's illegal (and DD discounts compulsory for variable DD customers) unless its a unmetered service.

Then the final result could be a compromise where fixed DD's stay but cannot be overinflated, and the possibility of a intermediate agency holding credit balances.

Chrysalis

theoretica said:

Variable does have the strength that it is much more responsive to someone trying to cut down on energy use - or messing up and using more.  Turn the heating down to save money and it can take months or even a year for it to work through into the DD unless you actively chase it and are persuasive. 

Personally, I would like to see prepay much more flexible - and not more expensive.  PAYG has many of the advantages of a variable DD, with even less risk of running up an unexpected high bill by leaving something on. It could be funded manually, or by DD. With imagination and a bit of programming/technology, might it be possible for someone to choose to limit and control their own power use - eg cut off or ask for an additional top up after £X daytime use, always allow £Y nighttime use...  another way to put people in control of their own power and spending.

Indeed I have said this as well, on a variable payment, you will get the reduced cost right away if consumption is reduced (or faulty meter replaced as is my case) and customer is aware there is a problem the first time they notice the higher amount paid.  Whilst a fixed DD can hide such an issue for a long time.

Section62

Chrysalis said:

izawa said:

Maybe it's my lack of knowledge but why in UK we have a system where our energy bill payments are not exact like in so many other countries?

I understand that the amount is estimated and spread over a year. Any overpayment/underpayment is settled towards the end.

Even with smart meters, our bill payments are still constant. The suppliers may decide to alter the amount mid year but it is never exact.

What I am trying to find is whether there was any historical reason in doing so? Perhaps, it could be due to avoid surprises to people if the bills were exact and made sense to spread over a year.

The billing system is very unusual, some of us on here, try to explain the pitfalls of it.  But one of the people who replied stated it started when all these small resellers started selling energy and here we are many years later with this now the most common billing type.  It is flawed in that most pay for energy before they use it and energy companies can use it as free cashflow plus even worse it is lost forever if a company is liquidated.

It is the payment system, not the billing system, which is the issue here.  Not being aware of the distinction between the two is what causes a lot of queries on a forum like this one.  The waters being muddied by websites and energy companies plays a big part in confusing people.

Chrysalis said:

As you said its not used on any other service or even used much by energy companies outside of the UK.

'Fixed' monthly DD's are used for quite a few services in the UK where the alternatives could include paying variable amounts in other ways.  E.g. Council Tax, Water, Insurance.

Some people opt to pay their council tax in 10 monthly installments giving them two 'free' months at the end of the financial year.  Others opt to pay annually or six-monthly.  In principle, opting to pay council tax in 12 (near) equal installments in no different to FMDD energy payment - it is just spreading the cost equally across the year to make monthly budgeting easier for those people who struggle to deal with bills that vary month to month.

It isn't suitable, or the preferred method, for some people. But for others it works.

Chrysalis

Section62 said:

Chrysalis said:

izawa said:

Maybe it's my lack of knowledge but why in UK we have a system where our energy bill payments are not exact like in so many other countries?

I understand that the amount is estimated and spread over a year. Any overpayment/underpayment is settled towards the end.

Even with smart meters, our bill payments are still constant. The suppliers may decide to alter the amount mid year but it is never exact.

What I am trying to find is whether there was any historical reason in doing so? Perhaps, it could be due to avoid surprises to people if the bills were exact and made sense to spread over a year.

The billing system is very unusual, some of us on here, try to explain the pitfalls of it.  But one of the people who replied stated it started when all these small resellers started selling energy and here we are many years later with this now the most common billing type.  It is flawed in that most pay for energy before they use it and energy companies can use it as free cashflow plus even worse it is lost forever if a company is liquidated.

It is the payment system, not the billing system, which is the issue here.  Not being aware of the distinction between the two is what causes a lot of queries on a forum like this one.  The waters being muddied by websites and energy companies plays a big part in confusing people.

Chrysalis said:

As you said its not used on any other service or even used much by energy companies outside of the UK.

'Fixed' monthly DD's are used for quite a few services in the UK where the alternatives could include paying variable amounts in other ways.  E.g. Council Tax, Water, Insurance.

Some people opt to pay their council tax in 10 monthly installments giving them two 'free' months at the end of the financial year.  Others opt to pay annually or six-monthly.  In principle, opting to pay council tax in 12 (near) equal installments in no different to FMDD energy payment - it is just spreading the cost equally across the year to make monthly budgeting easier for those people who struggle to deal with bills that vary month to month.

It isn't suitable, or the preferred method, for some people. But for others it works.

Council tax is a fixed bill.
Water companies should use it for unmetered bills, if they use it metered companies than thats unusual as well.
Insurance is a sort of fixed rate product, sure it can be adjusted e.g. if you make a claim but its not the same thing as a metered product.

The payment system is direct debit which is the same for fixed and variable DD, what changes is the amount taken, which is in effect "amount due", thats a billing metric, so yes its the billing system, I agree its important to use correct terminology and not get confused.

Section62

Chrysalis said:

theoretica said:

Variable does have the strength that it is much more responsive to someone trying to cut down on energy use - or messing up and using more.  Turn the heating down to save money and it can take months or even a year for it to work through into the DD unless you actively chase it and are persuasive. 

Personally, I would like to see prepay much more flexible - and not more expensive.  PAYG has many of the advantages of a variable DD, with even less risk of running up an unexpected high bill by leaving something on. It could be funded manually, or by DD. With imagination and a bit of programming/technology, might it be possible for someone to choose to limit and control their own power use - eg cut off or ask for an additional top up after £X daytime use, always allow £Y nighttime use...  another way to put people in control of their own power and spending.

Indeed I have said this as well, on a variable payment, you will get the reduced cost right away if consumption is reduced (or faulty meter replaced as is my case) and customer is aware there is a problem the first time they notice the higher amount paid.  Whilst a fixed DD can hide such an issue for a long time.

It boils down to the same thing - people can choose to monitor their meter readings, or monitor their monthly bill/payment. Or do nothing and assume it will all be Ok.

If there is evidence that people who never look at their meter will notice a change in their monthly payment and conclude there is a chance of something being wrong like a faulty meter (rather than assuming it is the energy company "ripping them off" if it goes up) then there could be some merit to the idea.  I'm not sure that evidence exists though.

Chrysalis

Section62 said:

Chrysalis said:

theoretica said:

Variable does have the strength that it is much more responsive to someone trying to cut down on energy use - or messing up and using more.  Turn the heating down to save money and it can take months or even a year for it to work through into the DD unless you actively chase it and are persuasive. 

Personally, I would like to see prepay much more flexible - and not more expensive.  PAYG has many of the advantages of a variable DD, with even less risk of running up an unexpected high bill by leaving something on. It could be funded manually, or by DD. With imagination and a bit of programming/technology, might it be possible for someone to choose to limit and control their own power use - eg cut off or ask for an additional top up after £X daytime use, always allow £Y nighttime use...  another way to put people in control of their own power and spending.

Indeed I have said this as well, on a variable payment, you will get the reduced cost right away if consumption is reduced (or faulty meter replaced as is my case) and customer is aware there is a problem the first time they notice the higher amount paid.  Whilst a fixed DD can hide such an issue for a long time.

It boils down to the same thing - people can choose to monitor their meter readings, or monitor their monthly bill/payment. Or do nothing and assume it will all be Ok.

If there is evidence that people who never look at their meter will notice a change in their monthly payment and conclude there is a chance of something being wrong like a faulty meter (rather than assuming it is the energy company "ripping them off" if it goes up) then there could be some merit to the idea.  I'm not sure that evidence exists though.

Well the evidence is in the form that its stated on here some people cannot afford to pay winter bills, so if money is indeed that tight, they would notice when their bank account is empty and payment is declined at the till buying their food shopping or something.  I expect people monitor their bank a lot more than their energy bill on the current system.

But I do agree speculation is not hard evidence.

Would we be having all these looking for excuses if someone was proposing a fixed DD over variable?

Section62

Chrysalis said:

Section62 said:

Council tax is a fixed bill.
Water companies should use it for unmetered bills, if they use it metered companies than thats unusual as well.
Insurance is a sort of fixed rate product, sure it can be adjusted e.g. if you make a claim but its not the same thing as a metered product.

Council Tax is a daily charge which varies according to circumstances.  If you make no changes during the year (i.e. constant number of adults, no changes in eligibility for discounts or benefits) then the bill is 'fixed'.  Equally, if you used exactly the same amount of energy each day you could consider your energy bill to be 'fixed'. The important point was the ability to spread the payment equally, based on an estimate of the annual total.

Water companies (in England) bill metered water and sewerage services on the basis of both a daily standing charge and volumetric consumption. If you opt to pay monthly by DD they will estimate the monthly DD based on prior consumption and (usually) bill six-monthly.  At the six month billing point the estimate for DD's going forward is reviewed. Customer accounts can be in credit or debit. Other than the period between reviews, this is almost exactly the same as FMDD for energy billing.

Chrysalis said:

The payment system is direct debit which is the same for fixed and variable DD, what changes is the amount taken, which is in effect "amount due", thats a billing metric, so yes its the billing system, I agree its important to use correct terminology and not get confused.

"Billing" is the calculation of cost of energy consumed for a period based on meter readings, with the addition of any standing charges for that period, plus the addition of VAT. "Billing" occurs at a fixed point in time, the period between "billing" points can vary.  The sum collected by energy companies through a monthly DD could be a payment in advance, a payment against a billed amount, or a payment to clear a debt balance.  The amount paid is not necessarily the "amount due" in accordance with the billing process, but is the amount the energy company are requesting.

Mstty

To label anyone's opinion an excuse and to suggest they have to go "looking" to give their opinion on why they might like the FMDD system doesn't lend to people getting involved.

I can't remember who last posted something like waiting for the "Tin foil hat brigade" this is along the same lines making the next person to put an opinion opposed to yours look wrong.

Section62

Chrysalis said:

Would we be having all these looking for excuses if someone was proposing a fixed DD over variable?

Nobody is "looking for excuses".  It is a fact that some people prefer to pay bills via a fixed monthly DD, even where the ultimate cost to them is greater than if they opted to pay variable amounts instead.