Why we are not equal consumers for energy suppliers?

suaveck

Hi All,

I was searching for similar topic, but haven't found the answers. 

We know there are different ways to pay the energy bills (with focus on electric in this post):

• monthly / quarterly DD
• prepayments
• paying on receipt of the bill

Also, we know that how we pay affects how much we pay (showing just electric charges, averages - prices vary by region, taken from https://www.moneysavingexpert.com/utilities/what-are-the-price-cap-unit-rates-/):

• DD: Unit rate: 34.04p per kWh, Standing charge: 46.36p per day

• prepayment: Unit rate: 33.08p per kWh, Standing charge: 51.41p per day

• paying on receipt of the bill: Unit rate: 36.80p per kWh, Standing charge: 52.40p per day

So if your household is using monthly (30 days) 100 kWh (it's just for illustration) it will be respectively: £47.95 (£575.40 pa), £48.50 (£582.00 pa), £52.52 (£630.24 pa).
The difference between lowest and highest bill would be:  £54.84 pa (and of course more if you use more electric, for example average usage in this post https://www.ovoenergy.com/guides/energy-guides/how-much-electricity-does-a-home-use was estimated as 2900 kWh)
Then the difference for an average household would be: £101.88 pa

Also, there are different ways of supplying your meter reading:
- reading the meter and supplying the result by yourself (monthly, quarterly or when asked)
- reading done by the energy supplier representative
- using smart meter (which are not smart at all) - readings done by the meter and sent automatically and directly to the energy supplier

Taking into account all of the above, finally my questions.

1. What is the best combination of the above to pay the bills, and maybe save, money and time?

We can find different information about this, and most, if not all, are saying that the best is paying by direct debit, because direct debits have some discount and the prices for DD are the lowest. Also for the supplier, this is the preferred method to take the payments - because consumers tend to forget paying?

2. Why we are not paying the same unit rates and standing charges regardless of chosen way to pay?

Your household, regardless of chosen method of paying, will use the same amount of energy. So why is this difference? Why consumers are being treated differently?

3. If you are lucky (depends on how you see it) and had "smart" meter installed... why paying on receipt of the bill is more expensive than when you pay by DD, or paying by DD is not cheaper than it currently is?

Having "smart" meter saves time, mostly for the energy supplier. They have accurate, almost immediate readings, they do not have to do estimates, deal with overcharged customers or undercharged ones. Energy supplier's process of charging customers for the usage of the energy can be dramatically simplified because of introduced automation. This means that the supplier is saving money in many ways, there is less paperwork, processes are faster, there are fewer complaints to deal with and so on. The time is saved, and the time is priceless.

So a "smart" meter user is saving money for the energy supplier.

I'm, in general, not a big fan of paying for the energy bills by DD, because I do not like estimated bills, I do not like DD increases, because some kind of program knows better how much I'm going to use. I've been overcharged a lot in the past, and I was waiting months to get my money back - so there is a little bit of consumer frustration behind this post.

From customer point of view, and maybe some logical thinking: in the ideal world you should have "smart" meter, you should pay on receipt of the bill, all customers should be treated in the same way, so pay the same price for the same usage:

• this would eliminate the possibility that someone is over/undercharged
• this would eliminate the feeling that we are not equally charged, so that we are not equal consumers
• this would save time, and the money, but this save should be reflected on both sides of the table, the supplier and the consumer
• more...

Maybe in this post there are all the answers, maybe not. But let's have some kind of discussion on this topic, and maybe find the best solution, and who knows... change the current system?

I wish you all low energy bills!

casjen

With respect this has been done to death oh these forums...

Spoonie_Turtle

You're not equal to the energy companies because the different systems have different administrative costs.  Octopus charged the same rate for all methods for years but even they have recently had to make a distinction.
https://octopus.energy/blog/energy-price-cap-oct-2022/#flexibleoct22rates

"The same is true with different payment methods – for example, it costs suppliers more to administer and manage accounts that don't pay by Direct Debit, so Ofgem factors that into their Price Caps."

"Not having a Direct Debit (and instead paying on receipt of your bill) costs us a lot more in admin. We don't think it's fair to make everyone cover that extra cost, so we do offer a cheaper rate for those who choose to pay by Direct Debit, which costs us less to manage."

Astria

If I wait for my bill to arrive in the post, and then pay that bill at the post office, it costs a lot more than paying by DD. Last I heard the PO charged a percentage of the cost of the bill and not a fixed fee.

I don't wish for those costs to be added to my bill because I don't need those services. Therefore I expect a reduction by paying this way.

So it's only fair that those who wish the energy providers to spend more expect that their bills be higher.

[Deleted User]

I think the other hundred or so threads on this topic have already had “some kind of discussion”.

Broadly speaking, doing things in different ways costs different amounts of money.

People who want to do things the expensive way want to socialise the cost and not pay more. People who want to do things the cheap way want to keep the benefit of it being cheaper.  

Discussions here will not solve anything or come up with anything new. 

Your suggestion appears to be to force everyone into the most cumbersome and expensive method of payment.

I notice that you’ve completely ignored the fact that the prices are different in different regions as well, so I’m looking forward to your new thread on that topic.

suaveck

[Deleted User] said:

I notice that you’ve completely ignored the fact that the prices are different in different regions as well, so I’m looking forward to your new thread on that topic.

I haven't ignored that, I mentioned that prices vary by region, and that I was using averages.

And I wasn't suggesting to go with the most cumbersome and expensive method. 

[Deleted User]

suaveck said:

Deleted_User said:

I notice that you’ve completely ignored the fact that the prices are different in different regions as well, so I’m looking forward to your new thread on that topic.

And I wasn't suggesting to go with the most cumbersome and expensive method. 

Pay on receipt of bill is almost always the most difficult method to process and the most expensive to support.

What you might plausibly mean is variable direct debit - which is a completely different method that not all suppliers offer.  And then you are removing everyone’s ability to build up credit in the summer should they do choose.