How much credit is too much?

Emma_brown96

Hello! Myself and my partner are new to paying energy bills (previously we’ve just transferred the bill amount over to our previous landlord. We’re now in our own home and have our own energy account where we pay by direct debit).  I’m aware that we overpay in the summer months in order to build up a credit ready for winter, but how much credit would you say is enough? We’re currently £350 in credit and I don’t know whether to just keep letting it build, or whether now is the time to ask my energy company to reduce my monthly direct debit.  For reference, our monthly direct debit was £200 a month (this is now £133 topped up to £200 with the government energy help), last month our bills were £80, and the month before that £70. We haven’t yet put the heating on, so I know my bills will be more expensive over the next few months- but I don’t see us using £200 a month worth anyway.  Any insight would be great, thank you 😊

Coffeekup

Personally I would keep that £350 credit till march/April next year.
Reason being there is a number of factors in bill's, first and foremost the price per unit. What type of heating you have in your home gas or electric. Then the number of appliances you use and leave on whilst at home and out the house.

If your new to the home you ideally should have your first meter reading or first few meter readings. If you don't try and find out from your first bill's or smart meters what they were and make a note of them, ideally in a spreadsheet.

Going forward make a note of the meter readings every month around the same date of every month and note them. Doing this will build a picture of how much kWh's you use for each fuel every month over a year.
Because kWh's are a constant (not varying like price per unit), you can then work out following year's costs based on the price per unit at that time. You can also make better educated decisions on cutting back on your energy usage, or see it using more than the following year/month so you know you have a new item costs x amount per month or something is not running efficiently.

Edit: that £350 could be all used up by march and you could owe them. As you currently have no idea how well the heat stays in the house and how long it takes to heat up to you desired temperature. 60%+ of your annual bill is used over 3-4 months if winter, so that £200 may just cover that months usage. It's also very mild currently for the time of year, so no need for heating or as much heating.

EssexHebridean

It's not going to be possible to say really in your case - because I'm guessing that you don't really have any solid idea of how your energy use is likely to pan out in the home you're living in now? 

You WILL use £200 a month over the coldest months I'd say - judging by your use for the past couple of months. In fact you might well use more than that if it gets really cold - and if we have the sort of winter we had in 2020 > 2021 where it stayed cold far longer and later than usual - that period of higher use and so higher cost will be more protracted of course. 

I'd suggest your best plan of action will be to continue as you are for now - but make sure that you stash the amount of the DD reduction away ahead of when it is needed, if you don't "need" to spend that money elsewhere, then don't. Take regular meter readings - probably weekly for your own reference, and monthly to give to your supplier if you don't have smart meters. Learn which things in your home use the most energy (if it gets hot, it'll be expensive is a good way of thinking about it) and learn how best to use things to minimise energy waste. (So think batch cooking, making sure your freezer is defrosted/fridge at the right temperature/boiler adjusted correctly/radiators set up properly) and keep monitoring things. 

I have to say that while £200 a month might be a little high - I'm guessing that for the average couple in the average home, it's probably not going to be all that far out. 

ariarnia

we have lived in our house about 10 years now and i agree with essex that its hard to judge exactly one year to the next (one year might be hotter or colder or even random things like one year you might both come down with the flu or have family visiting that want the house tropical!) but you build up a picture after settling in and learning what your house is like (every house is different ) and i also agree that if you are paying £80 with no heating you could easily use £150 £200 or £250 a month with heating (depending on your house and how you live in it).  

if it helps what we normally do is review things in january. and that's everything. the water dd. the energy. internet and phone contracts. savings accounts and credit cards. even if theres anything we are seeing that we want to do by next winter (like get new curtains or sort shelves for under the stairs). and thats when we would look at our credit balances and how cold things had been/how much we had used and decide if we want to up or cut our dds. 

this year is a bit more complicated as the government cap will be coming to an end on 1 april and ofgem will be announcing the new prices at the end of feb so we might put off looking at things until then. but if you do that then by feb you will have more than 6 months of use figures (and over the coldest months) so you will be in a good place to look at the new prices and if any fixes are on offer and work out what you want to do. 

Alnat1

There might be some adjustments you could easily do that will help cut the bills a bit. If you let us know how you heat the house and hot water, I'm sure forumites can come up with a few tips.

Jyana

Coffeekup said:

Personally I would keep that £350 credit till march/April next year.
Reason being there is a number of factors in bill's, first and foremost the price per unit. What type of heating you have in your home gas or electric. Then the number of appliances you use and leave on whilst at home and out the house.

If your new to the home you ideally should have your first meter reading or first few meter readings. If you don't try and find out from your first bill's or smart meters what they were and make a note of them, ideally in a spreadsheet.

Going forward make a note of the meter readings every month around the same date of every month and note them. Doing this will build a picture of how much kWh's you use for each fuel every month over a year.
Because kWh's are a constant (not varying like price per unit), you can then work out following year's costs based on the price per unit at that time. You can also make better educated decisions on cutting back on your energy usage, or see it using more than the following year/month so you know you have a new item costs x amount per month or something is not running efficiently.

Edit: that £350 could be all used up by march and you could owe them. As you currently have no idea how well the heat stays in the house and how long it takes to heat up to you desired temperature. 60%+ of your annual bill is used over 3-4 months if winter, so that £200 may just cover that months usage. It's also very mild currently for the time of year, so no need for heating or as much heating.

Excellent advice here, and from others too. The one thing I would add, is making sure that your supplier always has a current record of those readings you are taking. So, if you are not on a smart meter, make sure you update your figures on their website via your account at least once a month. This will help you massively in the future as they will be able to predict your usage, and therefore direct debt amounts, far more accurately.

Alnat1

If you do have smart meters, make sure your energy company are able to pick up the readings to calculate your bills. It should say smart or S on the bill at the side of the readings. If it's an estimate, make a note to send them manual readings each month from now on.

Making sure they have up to date readings each month will help build up an accurate usage record and they'll be able to set your DD at a realistic value.

FreeBear

Emma_brown96 said: For reference, our monthly direct debit was £200 a month (this is now £133 topped up to £200 with the government energy help), last month our bills were £80, and the month before that £70.

I'm currently about £400 in credit with my supplier and my bills for much of the year have been in the £40-60 region. Direct debit is currently at ~£100 (plus the government's £66). Once the cold weather really kicks in, I expect my energy consumption to double/treble and that £400 credit will quickly disappear b the end of April. If I'm still in credit come the spring, I'll be looking at annual consumption figures and asking for a refund.

Ballymoney

Currently £800 in credit whilst paying £300 (£234 + £66) a month. I’d want at least 2 x my monthly DD in credit going in to the winter months. If you can afford to leave it then you should do so imo.

kroggy

Emma_brown96 said:

Hello! Myself and my partner are new to paying energy bills (previously we’ve just transferred the bill amount over to our previous landlord. We’re now in our own home and have our own energy account where we pay by direct debit).  I’m aware that we overpay in the summer months in order to build up a credit ready for winter, but how much credit would you say is enough? We’re currently £350 in credit and I don’t know whether to just keep letting it build, or whether now is the time to ask my energy company to reduce my monthly direct debit.  For reference, our monthly direct debit was £200 a month (this is now £133 topped up to £200 with the government energy help), last month our bills were £80, and the month before that £70. We haven’t yet put the heating on, so I know my bills will be more expensive over the next few months- but I don’t see us using £200 a month worth anyway.  Any insight would be great, thank you 😊

My insight is that I would always prefer the money stays in MY savings account until needed.

The Energy Companies have always had weird predictions on my usage and they bear no resemblance to my usage, it is clear to me that these companies are fleecing us.  Some have been fined for doing so and some have been given warnings by OFGEM, make no mistake the amounts they take are for their own benefit.  In previous years with previous companies I always had to tell them to change the DD because "computer says" is almost always wrong.

There are two sorts of direct debit, one is BUDGET and the other is VARIABLE (at least that is what my energy company call them) on the latter you are charged only what you owe on your bill.

I have been with energy companies that went bust and did not get money owed back, I did all the things suggested, got OFGEM involved, I just ended up dealing with a receiver who never told or confirmed to the SOLR what was owed.  Also why give these billion pound companies billions of your money?

So the first thing I would do is ask to switch from budget to variable direct debit, then make a formal request for the return of your £350 and stick it in a savings account.  They have to pay you within 28 days to pay you your money (yes I know it is sick, your money and they get 28 days, not 3 days).

Another reason to use this approach is that to qualify for hardship payments you often have to be in debt to the company.  

When money comes in I immediately transfer what I need to my savings account, then when I get a bill I make sure I have enough to cover the direct debit.  In fact when I get money coming in I look at the balance on the day before and transfer that to my savings,  My bank sends me a text if a direct debit is about to go out that would take me into overdraft in which case I transfer enough to cover it.

Also I do not understand why your bill / direct debit was "topped up", it should be reduced by £66 a month surely?  Anyway, don't give them the satisfaction of using your money for their cashflow, that is my advice.

I am also holding out on having the heating on, I will only put it on when it is below -10C outside if we get that cold.  I know the help is there now but who knows what will happen after March.  I would rather save the money now and not face issues next year. 

Checkout the MSE page on heat the human and energy saving tips

https://www.moneysavingexpert.com/utilities/energy-saving-tips

https://www.moneysavingexpert.com/utilities/heat-the-human-not-the-home-save-energy

When you think you are cold just imagine those in Ukraine who have no heating and a far lower temperature.

macman

You can easily use 80% of your annual energy consumption during the coldest 3 months. Your usage and billing will soar once you finally put the heating on (not sure how you have resisted so far).