Why in UK the DD amount is constant figure?

agentcain

pochase said:

agentcain said:

pochase said:

The high standing charge is not an insurance to protect customer credits, it is to pay back the costs of those credits for the suppliers that went bust already last year, along with other SOLR costs.

So  your idea will not reduce the standing charge by a single penny.

What? I didn't talk of insurances.
If these sums were deposited on protected accounts and not with the companies own accounts, no credit would be lost so no cost would incur. 

Your post said

I don't see the argument of "raising standing charges to protect credits" holding water then, as it never should.

Raising standing charges to protect implies that it is done before it is necessary.

Standing charges have been raised in arears so the credits could be paid back. So it is not just an argument, the standing charges needed to be raised, otherwise millions would have lost their credit. 

You're being pedantic now. Protection doesn't imply prevention. "Protect" was just one of the terms thrown around, together with honour, support etc. Standing charges should only be covering some of the supplier's profit but most importantly the ongoing cost of the grid. And suppliers are not part of the grid, they are just middlemen. 

All I'm saying is that there wouldn't be a need for raising standing charges if A)these sums were off limits to the companies and B)more people paid exactly the amount owed, nothing more, so no credit sits idle in the suppliers' accounts. It would be trivial for anyone paying via DD to have their bank set-up another account, have a fixed transfer per month to that account and then have the energy supplier pull a VMDD from that account. There goes the "some can't budget properly" argument too.

But sure go ahead and justify the poor management choices and governmental control. I just don't see the "S" in the MSE this way.

Section62

agentcain said:

Section62 said:

agentcain said:

If these sums were deposited on protected accounts and not with the companies own accounts, no credit would be lost so no cost would incur. 

There would need to be entities put in place to hold these sums, and auditing of the arrangements, and additional transaction costs moving money between the different accounts.

So there would be a non-zero cost attached to the idea of ringfencing customer credit.

I'm pretty certain that cost would be much, much less than what we're facing now. 
And its not just the power of hindsight. Most of what you're talking about can happen automatically, with a system in place that would cost way less than the useless track-n-trace for covid. 

Even stuff that happens 'automatically' costs money.  Someone has to develop a system, it has to be maintained and updated and ultimately replaced with a newly developed system.  Setting up and operating a ringfenced system for holding customer credit will involve an army of accountants, lawyers, auditors, IT people etc.  They will all need paying, which means further upward pressure on customer bills.

And really it is the power of hindsight.  Ringfencing won't bring back the money which has already been lost through an unprecedented number of company failures.  Looking at the remaining companies, it isn't likely to be something repeated on that scale any time soon.  Measures are needed to increase the financial robustness of energy companies, particularly new entrants, but this proposal is effectively just a knee-jerk solution after the horse has become nothing more than a small dot on the horizon.

Section62

agentcain said:

It would be trivial for anyone paying via DD to have their bank set-up another account, have a fixed transfer per month to that account and then have the energy supplier pull a VMDD from that account. There goes the "some can't budget properly" argument too.

Are you suggesting each energy customer sets up a second current account with their bank and does the transfer themselves (e.g. by SO)?

A bit like having a 'bills' account in addition to a main current account?

Which most people are already free to do already if they think it will help them, but for many people who "can't budget properly" the problems are not going to get any easier by having two bank accounts to manage.  It is a solution that works fine for some people, but doesn't work for others.

Ultrasonic

agentcain said:
It would be trivial for anyone paying via DD to have their bank set-up another account, have a fixed transfer per month to that account and then have the energy supplier pull a VMDD from that account. There goes the "some can't budget properly" argument too.

You seem to be completely missing the point.

The default payment option only matters for someone who isn't going to spend time looking into alternatives. For anyone who does it's no big deal what it is if it's simple to change.

Your particular plan isn't the best though. Since you stressed the money saving part it would be better to have spare money in an interest paying savings account rather than having a second current account. You'd be told what the VMDD amount will be each month and could transfer funds accordingly. 

Sea_Shell

Does anyone know how Eon Next would handle the transition from FMDD to VMDD if your account is in credit?

Would they not take a DD at all, over summer, until your credit is no longer sufficient to cover that months use, and then a part DD, then the full DD?

GingerTim

When I changed to variable, EDF offered me the choice of either refunding the credit amount or crediting it against the next bill(s). I changed in March and this Friday is my first direct debit since. Hopefully Eon would offer the same!

Chrysalis

Ultrasonic said:

Are you expecting companies to come up with different estimates for every month of the year?

VMDD needs monthly readings as far as I can see, which is of course perfectly doable with smart meters. 

The difference between fixed and variable is not that fixed is never meant to change and variable is meant to change.  Thats part of the confusion, I have had to explain on here a few times that fixed DD can and will change.  My fixed rate DD amount changes every day now.

The actual difference is that the energy suppliers will attempt to "stabilise" fixed rate DD to avoid sudden big adjustments.  So adjustments are small nudges, rather than sudden large changes and that companies try to predict future seasonal adjustments, setting the DD based on that, of course as we know with the current market, this isnt a realistic expectation hence we have posts when people fixed rate tariff ends or when the SVR goes up.  Whilst variable rate DD will basically always fully pay of the bill.  The bill itself does not need to be based on actual readings and indeed years ago on quarterly billing that often was not the case.

So ultimately the difference is fixed DD is based on algorithms the suppliers use to predict annual cost divided by 12, the algorithm I expect includes assumptions that winter usage will be considerably higher than summer usage.  Whilst variable will have no algorithm, it simply charges the DD equal to the amount on the bill, estimated readings are based on previous readings and as far as I know dont adjust based on season. 

For both fixed DD and variable DD it's obviously better to have actual readings, but neither is dependent on actual readings.  Obviously though with estimated readings, Variable will still have the risk of a shock unexpected bill, if the estimate is too low.  But that can still happen with fixed as well, as we have to remember fixed DD is not actually fixed.

So I am not sure why you would expect an estimated reading to be adjusted every month on variable DD.  I think there needs to be stronger effort made to prevent situations where someone can be on estimated readings for a long period of time regardless of billing type.  I would personally make it a requirement that to be eligible for the DD discount you must have submitted a reading within the past 3 months or have a smart meter.  Octopus have their wheel of fortune which you can spin every time you submit a reading.  Nice idea, but not enough of an incentive.

Ultrasonic

Chrysalis said:

The difference between fixed and variable is not that fixed is never meant to change and variable is meant to change.  Thats part of the confusion, I have had to explain on here a few times that fixed DD can and will change.  My fixed rate DD amount changes every day now.

Please give me some credit - I am not 'confused' and you really don't need to 'explain' this to me. 

My point was that if there aren't monthly readings submitted then you're basically is the same position re. estimates and periodically (but not monthly) varying DD amounts in your alleged VMDD scheme as you would be in a FMDD one. 

To repeat, the only way we have a VMDD system worth talking about is if there are monthly meter readings, which is, as I've said, easily achievable with smart meters so I don't even know why we're 'debating' this.

Chrysalis

I did adjust my post to say I think we need more actual readings, you may not have seen the edit when you replied, specifically the bit in bold.   Apologies for labelling you as confused.

molerat

Ultrasonic said:

VMDD needs monthly readings as far as I can see, which is of course perfectly doable with smart meters. 

That bit made me chuckle, if only !

My daughter has just started looking after her FIL's house.  Smart meters fitted and IHD working and showing current tariff rates.  Big red letter arrived stating no meter read has been sent in for over a year so if not actioned bill will be estimated. Meters had been fitted by current energy supplier who were the local "electricity board" who he has always been with, he used to work for them.  Property is in a large estate on the inner edge of the town.  There is little hope of a working fit for purpose smart metering system in the foreseeable future.