Why in UK the DD amount is constant figure?

Chrysalis

Section62 said:

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.

Your council tax reply is extremely nit picky.  Sometimes people reply to just disagree and I guess you in that mood, I mean look at your description and think about it.  

"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'."

So its fixed.  Yes it changes if your circumstances change.  But do you think most people are constantly changing circumstances multiple times a year, and constantly moving adults in and out their homes?  You been nit picky.

Your reply on water means instead of energy been a unusual billing practice its "energy and water" so slightly expanded, its still unusual.

"amount due" is part of a bill.  Its not a method/type of payment.  We will go round in circles as this really bothers you for some reason.  So this will be my last reply to you on this thread, unless its over another point.

molerat

Section62 said:

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.

How is the cost ultimately more ?  You only pay for the energy you consume, it is not like my mobile contract where I pay for a certain amount of minutes and data whether I use them or not.  As long as the monthly payment is an accurate reflection of 1/12th EAC then there is no problem whether the account is carrying a credit or debit balance.  The least educated are often the poorest and least able to budget.  Paying an actual use of £100 for 8 months then being hit with bills of £400 for the 4 winter months would throw them into a crisis whereas 12 months at £200 is easier to cope with.  I wonder how big this overcharging really is as many of the complaint posts seen on here do not hold up to scrutiny, personally I have never had the problem. Any slight over estimation of EAC is now greatly magnified due to energy prices.  I could complain that my DD has gone up from £82 to £210 but I won't as that is an accurate reflection of 1/12th EAC based on the tariffs in force at the time.  Also for me I get 2% cashback for my energy DD but it is capped.  Actual bill payment would breach that cap so would actually cost me more.

FMDD is not the problem, in fact it is a lifesaver for many. It is the calculation of that payment and regulations on how that money is held that is.  Most of the problems are, IMO, down to weak regulation.

Section62

molerat said:

Section62 said:

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.

How is the cost ultimately more ?  You only pay for the energy you consume...

I was mainly talking about bills generally - e.g. a more obvious example such as paying insurance premiums by monthly DD where there is typically a charge for credit added into the payment amount.  Car Tax being another example where ultimate cost is greater with monthly payments.

But also that paying an energy bill by FMDD may result in transferring money to the service provider sooner than is legally necessary (e.g. compared to quarterly credit account billing) and therefore the individual paying the bill could lose out on interest earned (likely a small amount, but this is MSE) on that amount in the interim, or in a worse case may need to fund the credit they are giving the energy company by increasing their own personal debts (e.g. on a credit card or overdraft.)  (aka: always pay off high-cost debts first)

If someone has built up a credit balance with their energy supplier by living on an overdraft and credit cards then the ultimate cost to them will be greater than if they paid by variable amounts only as they fall due. (assuming discounts for paying by FMDD don't exceed the difference)

I agree with the rest of your post - FMDD can be a lifesaver. The avoidance of additional debt costs by not paying FMDD could result in far bigger issues if there is an inability to pay a large bill in the middle of winter.

Section62

Chrysalis said:

Your council tax reply is extremely nit picky.  Sometimes people reply to just disagree and I guess you in that mood, I mean look at your description and think about it.

I'm only concerned that people coming to a forum like this are getting accurate advice, it doesn't help people if the advice they are getting (or read) is wrong.  You are welcome to characterise that as "nit picky" and I'm quite happy to agree to disagree.

Chrysalis said:

So its fixed.  Yes it changes if your circumstances change.  But do you think most people are constantly changing circumstances multiple times a year, and constantly moving adults in and out their homes?

It depends on perspective.  Some people have stability in their lives and may never experience life-changes that mean their Council Tax circumstances change, so they may (incorrectly) perceive Council Tax to be "fixed".

Other people dip in and out of employment and eligibility for benefits, and have regular changes in their personal circumstances.  For those people Council Tax bills will appear to be anything other than "Fixed".  As it happens, the latter case are often people who also find it harder to manage their bills.

If you've worked with, or otherwise tried to help, people who are struggling with bills and difficult personal circumstances then you quickly get a better understanding of what life can be like in these circumstances - particularly the point that a "one-size" approach doesn't always work.  The forum members you've accused of "looking for excuses" are - IMV - effectively all saying the same thing.... FMDD is important for some people, but it won't suit everybody.

Chrysalis said:

"amount due" is part of a bill.  Its not a method/type of payment.  We will go round in circles as this really bothers you for some reason.  So this will be my last reply to you on this thread, unless its over another point.

It only "bothers" me in the sense that too many people believe their FMDD payment for energy is a "bill" and is all they are expected to pay.  Disambiguating "bill[ing]" and "payment" and being careful about the use of each word helps improve people's understanding of the process.

It is 101 of "understanding your energy costs" to appreciate the difference between a "bill" and a monthly "payment" (FMDD).... so much so that most threads on this forum with someone having received a large bill will walk the forum member through why they made an error in thinking their (very low) FMDD payment was all they ever needed to pay. The more people understand that, the less heartache and worry.

Chrysalis

molerat said:

Section62 said:

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.

How is the cost ultimately more ?  You only pay for the energy you consume, it is not like my mobile contract where I pay for a certain amount of minutes and data whether I use them or not.  As long as the monthly payment is an accurate reflection of 1/12th EAC then there is no problem whether the account is carrying a credit or debit balance.  The least educated are often the poorest and least able to budget.  Paying an actual use of £100 for 8 months then being hit with bills of £400 for the 4 winter months would throw them into a crisis whereas 12 months at £200 is easier to cope with.  I wonder how big this overcharging really is as many of the complaint posts seen on here do not hold up to scrutiny, personally I have never had the problem. Any slight over estimation of EAC is now greatly magnified due to energy prices.  I could complain that my DD has gone up from £82 to £210 but I won't as that is an accurate reflection of 1/12th EAC based on the tariffs in force at the time.  Also for me I get 2% cashback for my energy DD but it is capped.  Actual bill payment would breach that cap so would actually cost me more.

FMDD is not the problem, in fact it is a lifesaver for many. It is the calculation of that payment and regulations on how that money is held that is.  Most of the problems are, IMO, down to weak regulation.

We will probably never see exact figures, but what we do know and these two things are facts.

1 - Martin noticed the problem and said he would raise it with parliament.
2 - The government have noticed the problem and have threatened the energy companies with fines if they dont stop the practice.

I personally have been significantly overbilled last year (not including my disputed bill) with £900 in credit and my last pdf bill from octopus for april 22 2022 says they predict my electric annual cost to be £3800, yet the actual readings from my smart meter are nowhere near this cost.  I expect this over estimation came from a currently disputed bill from my old meter, and their systems have not taken into account the readings from the smart meter for the past 5 weeks (up to that bill).

There has been multiple reports I have come across where people get told their annual cost will increase around 1.8x-2.2x but their DD is increasing by 3-4x.

My DD is currently 96.90 per month (for both gas and electric), it is creeping up every passing week, was £94.80 in early April.  I dont know the actual bill offhand  for the month as they now seemingly are issuing bills for short periods, the last one is for 18 days. But was only £30 for both gas and electric.

So to summarise.

18 day bill based on actual usage £30.
Monthly DD to pay for this usage currently at nearly £100.
Estimated annual cost for Electric £3800, and Gas £160.

I suspect part of the problem might be that they assume customers will use a certian amount in winter over summer usage, so e.g. for me personally my winter usage is probably no more than 10% more than my summer usage, but if their algorithm's assume my winter usage is 4x more then they will adjust the DD amount to pay for that assumption.  The customers who use less than expected in Winter may well be the one's with the excessive DD's, but speculation on my part.

Chrysalis

Section62 said:

It is 101 of "understanding your energy costs" to appreciate the difference between a "bill" and a monthly "payment" (FMDD).... so much so that most threads on this forum with someone having received a large bill will walk the forum member through why they made an error in thinking their (very low) FMDD payment was all they ever needed to pay. The more people understand that, the less heartache and worry.

Do you honestly think "amount due" should always be the amount of the bill.  Ok wow.

I know people get very easily confused, and they may interpret what I said as amount due been that fully pays the bill, but I cant be responsible for that, it is what it is. 

If I have a £1000 credit card balance and the "amount due" £18 to fulfil the min payment requirement, does that mean I have paid off my credit card?

Chrysalis

Gerry1 said:

Quite apart from the problems caused by suppliers using inflated Fixed DDs to fund Ponzi schemes, it's often overlooked that it can take many months for an amount equal to the credit to be applied to the new SoLR account.

If the collapse happened in the autumn, the unfortunate punter will have been expecting the failed supplier's Fixed DD credit to have been sufficient to pay the big winter bills, but the SoLR won't make any allowance for this missing credit and will soon fret if the account goes into debit.  The punter will be hit with a double whammy, the SoLR's higher rates and big 'unsmoothed' winter bills.

The first few winter Fixed DD payments will effectively be Variable DDs in all but name.  However, the punter won't have put any money aside, so they'll be hit hard until the missing credit is eventually refunded.

I have observed its the same few active posters that are actively against Variable DD.

They play the case that it will break all the poor people with assumptions that poor people dont know how to budget.

I do wonder if  the real problem with Variable DD is they dont like the fact you pay for energy "after you use it".

One reason I suspect this is when I proposed a Fixed DD idea that would have you pay more than usage "after" the first winter, so you gradually pay back for the previous winter, my idea was a bad idea, yet it would offer similar to the consumer as current Fixed DD with the one difference, you not paying extra for the upcoming winter, instead extra for the previous winter.

A compromise means of paying could be SC in advance, but usage in arrears monthly.  So the companies get something ahead of time for cashflow.

My opinion is similar to you, Variable DD the default, Fixed DD an option.  With consideration for keeping credit balances on intermediate agencies accounts instead of supplier accounts.

Section62

Chrysalis said:

Section62 said:

It is 101 of "understanding your energy costs" to appreciate the difference between a "bill" and a monthly "payment" (FMDD).... so much so that most threads on this forum with someone having received a large bill will walk the forum member through why they made an error in thinking their (very low) FMDD payment was all they ever needed to pay. The more people understand that, the less heartache and worry.

Do you honestly think "amount due" should always be the amount of the bill.  Ok wow.

Do you mean "amount due" in a legal/contractual sense, or the colloquial one?

Chrysalis said:

I know people get very easily confused, and they may interpret what I said as amount due been that fully pays the bill, but I cant be responsible for that, it is what it is. 

If I have a £1000 credit card balance and the "amount due" £18 to fulfil the min payment requirement, does that mean I have paid off my credit card?

It is getting rather difficult to follow your argument, I'm really not sure what you mean by the above, and it isn't clear why you are now quite so focussed on the "amount due".

As a reminder, you said "The billing system is very unusual, some of us on here, try to explain the pitfalls of it."

I pointed out that it is the payment system, not the billing system, which is the issue.  Regardless of the method each of us choses to pay our bills, the method of calculating the bill is the same.  Therefore the "billing system" is not unusual at all.

One of the "pitfalls" is people thinking that a FMDD payment is the same as a "bill".  We can all help people avoid this particular pitfall by not making the same mistake when we post on here.

Section62

Chrysalis said:

I have observed its the same few active posters that are actively against Variable DD.

They play the case that it will break all the poor people with assumptions that poor people dont know how to budget.

I do wonder if  the real problem with Variable DD is they dont like the fact you pay for energy "after you use it".

I don't think anyone is "actively against Variable DD".  Some people have expressed a counter opinion to the idea that VDD should be the default method of payment.  It isn't unreasonable for people to have different points of view.

I've worked with what you describe as "poor people".  I'm not making any assumptions about the difficulties some of them have in budgeting.

I quite like Variable DD myself.  If it were the cheapest option available to me at the moment then I'd be quite happy paying that way.  But I don't allow my personal preferences regarding a payment method to sway my view that FMDD helps prevent some people from getting into worse financial difficulties and/or being hit with a large energy bill they are simply unable to pay.  I understand that different payment methods suit different people, and can accept that fact.

Gerry1

Chrysalis said:

Gerry1 said:

Quite apart from the problems caused by suppliers using inflated Fixed DDs to fund Ponzi schemes, it's often overlooked that it can take many months for an amount equal to the credit to be applied to the new SoLR account.

If the collapse happened in the autumn, the unfortunate punter will have been expecting the failed supplier's Fixed DD credit to have been sufficient to pay the big winter bills, but the SoLR won't make any allowance for this missing credit and will soon fret if the account goes into debit.  The punter will be hit with a double whammy, the SoLR's higher rates and big 'unsmoothed' winter bills.

The first few winter Fixed DD payments will effectively be Variable DDs in all but name.  However, the punter won't have put any money aside, so they'll be hit hard until the missing credit is eventually refunded.

A compromise means of paying could be SC in advance, but usage in arrears monthly.  So the companies get something ahead of time for cashflow.

That would certainly be fair, and was the traditional way of paying for landlines, albeit quarterly: line rental in advance, call charges in arrears.

Some energy companies collect DDs monthly but bill only six monthly, and that must be the worst of all worlds, e.g. when the April bill reveals that winter usage has been far higher than expected, the fixed-but-not-fixed DD must rocket and it's far too late to turn down the thermostat.  That practice needs to be stamped out immediately.

And as we've seen only too often recently, FMDDs means that things can go horribly wrong when a high credit balance has built up and the company then goes bust.  The unlucky punter won't have immediate access their credit balance to pay their SoLR's higher rates, and this delay could be significantly extended if a switch to a third party was taking place when the original supplier went bust.