Energy how do they justify your DD increase

MikeJXE

Gerry1 said:

MikeJXE said:

I am in rented and the contract forbids moving energy supplier

That's unlikely to be enforceable.

https://www.citizensadvice.org.uk/consumer/energy/energy-supply/get-a-better-energy-deal/switching-energy-supplier-if-youre-a-tenant/

Yes I realise that, I went along with it as I didn't need to change but now I need to look into it

Thanks

jimjames

MikeJXE said:

EssexHebridean said:

Right - so in fact they don't actually know what your usage is, and so can only base their calculations on what they estimate you might use. Can they just accept at face value what you are telling them you will use? No - because the vast majority of people out there either think that they use less than they do, or they assume that it will cost less than it will. As your history with your supplier builds up, their estimates should get more accurate. In the meantime your best bet is to approach them with a "I think this is being unreasonable and would like to pay £X please" approach - Martin Lewis has talked about this many times - including on his podcast which might be worth a listen for you. 

Just spotted that you have cancelled your DD - do remember to increase the amount you are setting aside for payments to take account of the fact that you will probably now be paying higher rates, won't you. 

Yes I understand the implications of cancelling DD and It doesn't bother me in the least, I would willingly pay Whole amount monthly direct debit but they have not offered that,
. 

This is a money saving forum so if it doesn't bother you in the least that you're paying 7% or so more than you need to then maybe you're in the wrong place?

MikeJXE said:

EssexHebridean said:

Right - so in fact they don't actually know what your usage is, and so can only base their calculations on what they estimate you might use. Can they just accept at face value what you are telling them you will use? No - because the vast majority of people out there either think that they use less than they do, or they assume that it will cost less than it will. As your history with your supplier builds up, their estimates should get more accurate. In the meantime your best bet is to approach them with a "I think this is being unreasonable and would like to pay £X please" approach - Martin Lewis has talked about this many times - including on his podcast which might be worth a listen for you. 

Just spotted that you have cancelled your DD - do remember to increase the amount you are setting aside for payments to take account of the fact that you will probably now be paying higher rates, won't you. 

I would willingly pay Whole amount monthly direct debit but they have not offered that,
. 

You need to ask, they won't automatically offer you that option and not all suppliers support it

pseudodox

So as a tenant you do have the choice to move, with of course a polite notification to the landlord.  OVO will not offer whole bill payments. Though in view of increasing numbers being unhappy with FDD it might one day become an option companies have to legally offer.

I just don't get why people prefer to hand money over rather than keep it in their own account - in perhaps a dedicated savings pot, especially in view of the BoE rise again in interest rates.  Are people now so lacking in self-discipline that they cannot avoid the tempation to spend every last penny rather than save some for a rainy (or cold) day?  I have a money box that was my grandmothers - six slotted compartments into which she distributed her then (cash) pension each week.  Rent, Electric, Coal, Water, Food, Other.  There was always the money to pay any bill that arrived. Only "Other" could be dipped into for non-essentials.  If it was empty she had to wait to purchase a new frock, or have her hair done.

EssexHebridean

pseudodox said:

So as a tenant you do have the choice to move, with of course a polite notification to the landlord.  OVO will not offer whole bill payments. Though in view of increasing numbers being unhappy with FDD it might one day become an option companies have to legally offer.

I just don't get why people prefer to hand money over rather than keep it in their own account - in perhaps a dedicated savings pot, especially in view of the BoE rise again in interest rates.  Are people now so lacking in self-discipline that they cannot avoid the tempation to spend every last penny rather than save some for a rainy (or cold) day?  I have a money box that was my grandmothers - six slotted compartments into which she distributed her then (cash) pension each week.  Rent, Electric, Coal, Water, Food, Other.  There was always the money to pay any bill that arrived. Only "Other" could be dipped into for non-essentials.  If it was empty she had to wait to purchase a new frock, or have her hair done.

Being able to save for a rainy day is wonderful - but you need a degree of financial privilege, ie surplus income beyond your essential expenditure, to be able to do so. With bills increasing rapidly in the last year, even many of those who might have been able to do that a short while ago would struggle to do so now.  Sometimes it’s not a “lack of self discipline” at all - it’s that rent, council tax, food etc have to paid for first, and then there is no money left. 

MikeJXE

pseudodox said:

So as a tenant you do have the choice to move, with of course a polite notification to the landlord.  OVO will not offer whole bill payments. Though in view of increasing numbers being unhappy with FDD it might one day become an option companies have to legally offer.

I just don't get why people prefer to hand money over rather than keep it in their own account - in perhaps a dedicated savings pot, especially in view of the BoE rise again in interest rates.  Are people now so lacking in self-discipline that they cannot avoid the tempation to spend every last penny rather than save some for a rainy (or cold) day?  I have a money box that was my grandmothers - six slotted compartments into which she distributed her then (cash) pension each week.  Rent, Electric, Coal, Water, Food, Other.  There was always the money to pay any bill that arrived. Only "Other" could be dipped into for non-essentials.  If it was empty she had to wait to purchase a new frock, or have her hair done.

I have contacted my landlords agent and requested permission to move and if he authorises that I will be walking 

pseudodox

rent, council tax, food etc have to paid for first, and then there is no money left. 
So what do you pay the energy FDD from?

If there is no money left how can you afford to give to the energy company?  Your energy bills are what they are and have to be paid for from your finite income.  So how does giving "essential" money in advance to the energy supplier make it more affordable than keeping it in your own savings account and using it to pay bills?  I read on here of people building up huge amounts of credit towards future bills.  That money could be siphoned from income into a Regular Savings Account and earning some interest - here on this site is a guide to accounts now paying around 5% which allow withdrawals when you need the cash to pay those bills.

OVO wanted £220 per month FDD from me from October.  OK that would earn the huge sum of £1 over a month in my savings.  But if I put another £220 away in each of November and December then I am slowly growing the pot, and follow that through into next year.  Plus from October to March I could be adding in the £400 government allowance and in December my £500 WFA. So by end of December I would have had over £1350 salted away.  Modest amounts of interest earned maybe, but as my actual bills from now until spring are not going to use up £1350 (at current prices) so the pot will be in surplus and will grow even more over the summer, ready for next winter.  It is exactly the same money, plus some, that could be sitting in OVOs coffers.

Of course I did not have £220 per month to give to OVO, not unless I drew it from my established savings anyway.  My essential outgoings exceed my income - all extras (holidays, major repairs) have to be paid from an "old age" savings pot, which with careful management should never see me in debt, unless I live more than another 30 years and get my telegram from William and Kate.

MikeJXE

pseudodox said:

rent, council tax, food etc have to paid for first, and then there is no money left. 
So what do you pay the energy FDD from?

If there is no money left how can you afford to give to the energy company?  Your energy bills are what they are and have to be paid for from your finite income.  So how does giving "essential" money in advance to the energy supplier make it more affordable than keeping it in your own savings account and using it to pay bills?  I read on here of people building up huge amounts of credit towards future bills.  That money could be siphoned from income into a Regular Savings Account and earning some interest - here on this site is a guide to accounts now paying around 5% which allow withdrawals when you need the cash to pay those bills.

OVO wanted £220 per month FDD from me from October.  OK that would earn the huge sum of £1 over a month in my savings.  But if I put another £220 away in each of November and December then I am slowly growing the pot, and follow that through into next year.  Plus from October to March I could be adding in the £400 government allowance and in December my £500 WFA. So by end of December I would have had over £1350 salted away.  Modest amounts of interest earned maybe, but as my actual bills from now until spring are not going to use up £1350 (at current prices) so the pot will be in surplus and will grow even more over the summer, ready for next winter.  It is exactly the same money, plus some, that could be sitting in OVOs coffers.

Of course I did not have £220 per month to give to OVO, not unless I drew it from my established savings anyway.  My essential outgoings exceed my income - all extras (holidays, major repairs) have to be paid from an "old age" savings pot, which with careful management should never see me in debt, unless I live more than another 30 years and get my telegram from William and Kate.

The energy companies want the money up front, be in credit at the end of winter. 

The cash in their bank is better for them than it being in yours, does't matter what hardship they might cause that just collateral damage

deano2099

Deleted_User said:

Wouldn't "review every month" defeat the purpose of fixed direct debit though?

Depends what you consider the purpose of a fixed direct debit to be. If it's to spread the payments evenly throughout the year then it still works (you'd review every month, but you'd still weight the winter months more heavily).
If it's to have financial certainty about your outgoings...well that's not really possible, the idea it can do that is just a myth, as energy is billed on usage, and bills will go up and down. Eventually, a correction will be needed, one way or the other.

deano2099

EssexHebridean said:

deano2099 said:

EssexHebridean said:

Right - so in fact they don't actually know what your usage is, and so can only base their calculations on what they estimate you might use. Can they just accept at face value what you are telling them you will use?

But in this case there's three other things acting here.
a) the OP has more data on past usage than they have, which he has offered to share But as stated, they're unlikely to accept either "here's what I think I'll use" or "I'm cutting down". 
b) he's currently in credit, and  Nowhere near enough credit to stop him heading into debt very soon, allowing that he's not even been billed for the first cold period of th winter yet, and we could have a good deal more of that coming.
c) it's the start, not the end of winter.  Not quite sure what the argument is here? That he's only in 1 x month's DD (roughly) at the start of winter just underlines my response to your point b above, surely? 

Comments in bold. 

The point is that his billing period is Jan-Jan, so he doesn't need to be in credit right now. Assuming I'm understanding correctly, he's had a direct debit set at an amount so that over the 12 months, he pays enough to cover his full usage at the end of that 12 months. As the majority of winter falls in the start of that period then yes, in March he may be in "debt" but it's paid back as the direct debit remains the same over the 12 months. That's the whole point of a fixed direct debit. The variation within that 12 months isn't really relevant - if he pays what the energy company suggest, and use what they're predicting he will use, he will still be in significant "debt" on the account come March. But come December it will have evened out. 
If your billing period is Apr-Apr, you'll build up credit and then use that in the winter. But a billing period of Jan-Jan you get the opposite. 

The reason it matters is that if someone is billed for Apr-Apr and in April says "well, this is too much, I'm going to use less this winter, so I want a lower direct debit" then you won't know if that's true until 7-8 months later. At which point a customer that's been paying £50 too little every month is going to be faced with finding an extra £400, and that can be problematic. I can see why an energy company don't want that happening. In my fantasy world everyone can manage their money properly and it's that person's fault and they need to deal with it, but I get in reality it can lead to bad debt and costs in recovery for the energy company. I don't like it, but I see the logic.

But if your billing period is Jan-Jan, like the OP, that isn't possible. Because the energy company can see the exact usage at the end of Jan, and at the end of Feb (and can extrapolate similar usage for the next December). Yes, regardless, the account will be in "debt" at the end of Feb, But it should be clear by the end of Jan if the estimate was accurate or not, and if the payback over the year will make ends meet. If it isn't, and based on their winter usage, you know that the customer actually needed to be paying £50 a month more, then you can just put the direct debit up by £50 and say "based on your usage in January, we were right and you were wrong". You can ask them for the extra £50 in January as a one-off payment, or just put the DD up by an extra fiver to recoup it. There's no £400 extra bill.

This can work the other way around, for customers who have much higher than expected usage in summer and much lower in winter - maybe they spend winter away from home or run a hot tub every night in the summer - but generally winter usage is significantly higher and therefore where the most risk exist if the estimate is wrong in either direction. If winter is at the start of the billing period, it's much easier to correct for it. 

deano2099

EssexHebridean said:

pseudodox said:

So as a tenant you do have the choice to move, with of course a polite notification to the landlord.  OVO will not offer whole bill payments. Though in view of increasing numbers being unhappy with FDD it might one day become an option companies have to legally offer.

I just don't get why people prefer to hand money over rather than keep it in their own account - in perhaps a dedicated savings pot, especially in view of the BoE rise again in interest rates.  Are people now so lacking in self-discipline that they cannot avoid the tempation to spend every last penny rather than save some for a rainy (or cold) day?  I have a money box that was my grandmothers - six slotted compartments into which she distributed her then (cash) pension each week.  Rent, Electric, Coal, Water, Food, Other.  There was always the money to pay any bill that arrived. Only "Other" could be dipped into for non-essentials.  If it was empty she had to wait to purchase a new frock, or have her hair done.

Being able to save for a rainy day is wonderful - but you need a degree of financial privilege, ie surplus income beyond your essential expenditure, to be able to do so. With bills increasing rapidly in the last year, even many of those who might have been able to do that a short while ago would struggle to do so now.  Sometimes it’s not a “lack of self discipline” at all - it’s that rent, council tax, food etc have to paid for first, and then there is no money left. 

But Tesco don't look at your Clubcard and say "you spend £300 on food every month, so you need to set up a direct debit for that amount and we'll give you £300 of vouchers you can spend on food every month in return" and then refuse to sell you food if you say that you don't want to spend that much next month and are going to cut back.

The point of fixed direct debits is to help the customer spread their payments evenly over 12 months. They're not there to force customers to prioritise electric/gas over food. It happens to have that effect, and there's an argument to say that's a positive design accident (there are more food banks than warm banks, after all) but it certainly wasn't the intent of the system.