Overcharging for paying quarterly

may2022

Does anyone know if there is any progress on stopping the outrageous practice of energy companies charging more if you dont want to pay by direct debit. I always pay on receipt of a bill and it is wrong to ask me to pay more because of this as it is to also to overcharge people who pre pay.

MattMattMattUK

may2022 said:

Does anyone know if there is any progress on stopping the outrageous practice of energy companies charging more if you dont want to pay by direct debit. I always pay on receipt of a bill and it is wrong to ask me to pay more because of this as it is to also to overcharge people who pre pay.

It is not overcharging you, not paying by Direct Debit has additional costs to the supplier, this is reflected in the higher price cap that Ofgem set for those who do not pay by Direct Debit. Pre-payment does cost more to administer as well, you need the payment networks, the processing fees on the usually much smaller payments, often card fees, retailer fees etc. If you want the Direct Debit price then pay by Direct Debit.

wild666

Decades ago everyone paid on receipt of a bill as the bill was every 3 months in arrears now it's DD and most people are in front with the payments.

The_Fat_Controller

No.

The rules are set that way, are transparent and you, as a customer, have a choice.

You have made yours and can change that at any time you wish.

Astria

The alternative is that you have the same rates as DD customers but have to pay a percentage surcharge on your bill if you decide to pay for your usage via a method which incurs more cost for the supplier. So the end result would be the same as you are paying now, but easily showing you how much extra you are paying by not using the cheaper method available.

MWT

may2022 said:

I always pay on receipt of a bill and it is wrong to ask me to pay more because of this as it is to also to overcharge people who pre pay.

.. both of those payment methods involve additional costs for the supplier and the price you pay is reflective of that and is also recognised by Ofgem in the different caps for those payment methods, so no, this is not 'overcharging' and no it is not going to change any time soon.

If you always pay on receipt of the bill, why not change to variable DD as that usually is priced the same as other DD accounts, but you will probably have to change to monthly billing.

Your desire to have the supplier carry your debt for 3 months at a time is what is costing you money...

may2022

What are these "additional costs" ? they surely are the same as any other cost to any other business that trades. I am afraid MWT you are wrong and the energy companies are overcharging and profiting from there position. You know full well it is very difficult to switch suppliers and not be compelled to accept a direct debit option so why write that. The 3 months you write of is the energy companies period and not the customers, in my case I would happily pay monthly but the billing period does not currently allow for this. Ofgem are in my opinion a waste of time and they do not look after the interests of the consumer.

pochase

may2022 said:

What are these "additional costs" ? they surely are the same as any other cost to any other business that trades. I am afraid MWT you are wrong and the energy companies are overcharging and profiting from there position. You know full well it is very difficult to switch suppliers and not be compelled to accept a direct debit option so why write that. The 3 months you write of is the energy companies period and not the customers, in my case I would happily pay monthly but the billing period does not currently allow for this. Ofgem are in my opinion a waste of time and they do not look after the interests of the consumer.

Who is your supplier? Most suppliers allow you to go onto monthly variable debit order, sometimes by a different name. You will need to call most of them as often you cannot do this on the web site.

You are using a payment method that causes additional administration, your payment needs to be linked to your account, for a direct debit this is an automated process, while it is at least partly manual for other payment forms. Also your account needs to be monitored if you are paying. This additional cost is distributed between the people who choose not to pay by direct debit, why should everybody pay for a cost that you generate completely voluntary by deciding to use a payment method that is more expensive?

Astria

may2022 said:

What are these "additional costs" ? they surely are the same as any other cost to any other business that trades. I am afraid MWT you are wrong and the energy companies are overcharging and profiting from there position. You know full well it is very difficult to switch suppliers and not be compelled to accept a direct debit option so why write that. The 3 months you write of is the energy companies period and not the customers, in my case I would happily pay monthly but the billing period does not currently allow for this. Ofgem are in my opinion a waste of time and they do not look after the interests of the consumer.

Someone pays via DD -> energy company can take the funds from your account with very little cost. They most likely have a flat rate due to the amount of customers paying via this method.

Someone wants a bill they can pay at the post office -> Bill has to be printed (which typically cost more than DD costs alone), then posted (another significant expense), then you take the bill to the post office (or whoever) who also don't process the bill for free.

So yes, payment on receipt of bill costs significantly more than DD.

Gerry1

I tend to agree with the OP: the people without bank accounts (about 1.3 million apparently) tend to be the poorest, similarly those with pre-payment.  With cashless payments and the latest technology, the suppliers' extra costs of supporting pre-payment and Pay On Receipt of Bill must now be almost negligible compared to what they were when someone had to call round frequently to collect the half crowns from the meter, assuming they hadn't been stolen.

Smart meters (over £400 per installation) can be remotely switched to Pre Payment mode, so the suppliers' extra costs must now be even lower.  Bad debt can also be a problem with DD payments (moonlight flits, debit of £1k building up because of estimated readings for years) but this is far less likely with pre-payment meters.

All in all, there's probably a good case economically for charging people the exactly same rates regardless of payment method (don't Octopus already do this?), quite apart from the social justice element.

It's something about which dozy Ofgem should have ruled, making the rates the same for all methods of payment.  Indeed, the same could be said for abolishing the regional differences in standing charges and kWh rates.  After all, it costs the same to post a letter from Southwark to Shoreditch as it does from the Scillies to Shetland: we happily accept the cross subsidy. So why not the same principle for energy?

But don't expect a change any time soon: Ofgem is far too inefficient and industry centric, and does little to represent the consumer.  Last December Citizens Advice were scathing about Ofgem's performance, calling for an independent review of Ofgem's approach to compliance and enforcement.  Ofgem then commissioned Oxera to evaluate its performance.  Oxera's report, published a few days ago, was equally critical, saying that Ofgem failed to sufficiently check the financial resilience of new suppliers to the market prior to the energy crisis

With such a dismal record in getting even the basics right, the chances of Ofgem raising its game, thinking outside the box and pro-actively looking after the most vulnerable in society must be close to zero.

Thrugelmir

may2022 said:

What are these "additional costs" ? 

Debt collection. Ever been involved in running a business financially?  It's a challenge.