Fixed Monthly vs. Variable Monthly Direct Debit

rupedogg

I am with Shell Energy.  I currently pay a fixed amount each month by direct debit.

Shell have increased my direct debit by an outrageous amount, so I've been considering what to do.

I see that I can instead pay a variable monthly direct debit, whereby I only pay for the energy I have used based on submitted meter readings.  As far as I can tell, there is no downside to doing so - the unit prices are the same as if paying by direct debit, it qualifies for the price discount due to being payment by direct debit.

Am I missing something?

And, if not, what is the benefit of a fixed monthly direct debit over variable? Is it just for people who like the certainty of a fixed monthly payment?

[Deleted User]

rupedogg said:

Am I missing something?

And, if not, what is the benefit of a fixed monthly direct debit over variable? Is it just for people who like the certainty of a fixed monthly payment?

No, seems like you've understood it correctly.

The cap (and therefore unit rates) are the same for variable DD as for fixed DD.  You will never build up any credit or debt because you will pay exactly for your usage (as long as you submit meter readings at the right times).

Primarily fixed DD is for people who want a relatively constant monthly outgoing, and don't want to personally have to budget for bills in winter that can be many times greater than bills in summer - 5 or 6 times higher is not unusual - I like it for this reason because neither my other costs or my salary change seasonally.

If you are happy to pay widely varying bills, and trust yourself to have the money available at the right times, then variable DD could be right for you.

Only one pitfall - suppliers do not have to offer variable DD, and some are starting to remove the option.

t0rt0ise

The downside as some see it is that you have to pay a lot in winter months and it's easier for some to pay an even amount all year round. 

fordyms

Biggest upside to the variable DD is your not held to ransom with ludicrously over estimated monthly payments from the energy companies.  If you can afford pay variable monthly bills, especially over winter, there is no downside that I can see.  You owe them nothing but for what you have used and you aren't lending them your money to sit on.  It's not that long ago that everyone got a quarterly bill through the post.

inkydolphin

Variable DD does require good budgeting throughout the year (unless you are loaded) but if you are able/prepared to do that (which is essentially what the energy company does for you on fixed DD) then you should be fine.

ariarnia

one important thing to check is why your dd went up by so much and if that increase was reasonable or over estimated (and if it should have gone up at least some if not as far as it did). 

before making any change you should probably just double check the numbers (all you need for that is your tariff information and your annual energy usage from your meter readings or bills so it only takes 5 mins) or it could be that your monthly payments are still higher than your old dd plus you now can't spread the cost over the year. 

rupedogg

ariarnia said:

one important thing to check is why your dd went up by so much and if that increase was reasonable or over estimated (and if it should have gone up at least some if not as far as it did). 

before making any change you should probably just double check the numbers (all you need for that is your tariff information and your annual energy usage from your meter readings or bills so it only takes 5 mins) or it could be that your monthly payments are still higher than your old dd plus you now can't spread the cost over the year. 

This is good advice. I have checked and am happy that I've done the relevant maths and made the relevant considerations. I'm currently £300 in credit; my estimated annual use (units from bills, multiplied by the new rates) is £2,400 (before the £400 rebate); so annual use would be ~£2,000 post-rebate, and ~£1,700 factoring in outstanding credit. Shell wanted to increase my DD to £294 per month (~£3,500 per year).

inkydolphin

Some energy companies' systems do seem to be struggling with all of this. I'm with Bulb and although they weren't trying to put my fixed DD up to unfathomable amounts, the suggested monthly payment was fluctuating (up and down) on an almost daily basis with no new meter readings having been submitted. This dented my confidence in their system and made me think I could be subject to an unreasonable increase at some point. That was the reason I changed to variable DD.  

sandy700

inkydolphin said:

Variable DD does require good budgeting throughout the year (unless you are loaded) but if you are able/prepared to do that (which is essentially what the energy company does for you on fixed DD) then you should be fine.

I'm not loaded but I would prefer and can afford to pay by variable direct debit.
I only ever went to paying by DD because I got a discount on paying every 3 months by going to the Hydro Electric shop and paying the bill over the counter.

I always waited until the red bill came. 

inkydolphin

sandy700 said:

inkydolphin said:

Variable DD does require good budgeting throughout the year (unless you are loaded) but if you are able/prepared to do that (which is essentially what the energy company does for you on fixed DD) then you should be fine.

I'm not loaded but I would prefer and can afford to pay by variable direct debit.
I only ever went to paying by DD because I got a discount on paying every 3 months by going to the Hydro Electric shop and paying the bill over the counter.

I always waited until the red bill came. 

Ah the halcyon days of waiting for the red bill! The most exciting thing I get in the post now is a FarmFoods flyer

Yeah I was being a bit melodramatic with "loaded" - more "have enough money in your account not to have to worry about an energy bill" I guess, but not quite as snappy 🙂

rab290

I have the same situation with Shell Energy, I am £550 in credit and they want to increase my DD to £235 from Nov .They have advised that they have based this increase on THEIR projection of my usage for the next 16 months which comes to £4412 (annualised = £3310). Yet in my latest bill they have an annual projection of £2408, almost identical to my view. I have generated a spreadsheet of my usage and bills since Sept 21 and worked out that my annual usage would be 1200 KWH (Gas) and 2900 KWH (electric). Using the latest Price Cap tariff rates this equates to an annual cost of £2470. Hence their projection is nearly £1200 more than it should be. I've also used the MSE tool which verifies my numbers are correct. I've raised a complaint but they still haven't given me the detail of how they have arrived at their projection. I'm now looking at the variable direct debit option, rather than line their pockets with an increasing monthly credit balance based on their unexplained projection  At least for the winter months I will only be spending my credit balance and have some additional winter usage offset by the EPG. If this energy crisis ever gets resolved I will switch from Shell Energy as soon as I possibly can. My smart meters haven't worked since 21st September either, their service is absolutely abysmal.