MONTHLY DIRECT DEBITS AND WHAT IS A REASONABLE AMOUNT TO BE IN DEBT IN MAY

bristolleedsfan

Mstty said:

Spoonie_Turtle said:

Mstty said:

MWT said:

Mstty said:

MWT said:

deano2099 said:

dunstonh said:

If you follow you idea of always being in credit you might as well pay the full every time they bill you.  Completely goes again the idea of having a regular monthly payment.  

Monthly payments are there to help people budget.  Not to borrow money from the energy supplier.

It doesn't help people budget if they open an account in November, get hit with a really high direct debit for the winter months (as it has to cover actual usage under your system) and then have that halved in March.
(Or more likely, not halved unless the customer requests it, and then end up £1000s in credit)

It does as long as they don't spend the refund they would get from their previous supplier when they move accounts...

What about people that start their energy lives (1st property) in October no previous supplier first home. It does happen not everyone starts their energy account life in the summer.

Of course, everyone has to start somewhere, but the basis of this shouldn't be an expectation that they can borrow money from their energy supplier to cover the bills...

… In fact everyone is in debit for their first ever month of energy bills on DD. It really does depend on your starting point.

I don't know which other suppliers take a month's payment upfront but Octopus certainly do.  Bulb did as well.

Thanks for this interesting👍

But potentially incorrect for all customers as evidences below in chat from another customer.

MWT had been giving tips on how Octopus customers balances can operate which is not the same as how Octopus system is set up for customers balances to operate when paying by monthly DD in the same way as customers posting that Octopus customers can pay by variable DD is a tip being as variable DD appears not to be mentioned as an option anywhere on Octopus website as well as not being account option that they offer.

mmmmikey

matt_drummer said:

mmmmikey said:

Thanks for the reply - makes sense to me now.

Incidentally, in regards to FDD, my view is that it should be phased out in favour of Smart Prepayment tariffs, which would give people much the same thing given the direction of travel of FDD seems to be to put you in a position where you're always paying in advance. The advantage of Smart Prepayment is that it is much more obvious what you're doing - building up credit on the meter in the summer to pay for the winter - just like the old days of jars on the mantlepiece. It's only a small step from there to people putting the same amount in a savings account if they prefer.

And the energy company could simply suggest an amount to overpay in the summer based on some industry wide algorithm and leave it to people to decide for themselves whether to pay more or less. I'd also expect Smart Prepayment rates to be discounted to reflect the lower cost to the energy companies, and some of them are already doing that.

It sounds identical to a fixed direct debit to me.

What is the difference?

The energy company is still being paid in advance?

Hi, in terms of how much you pay and when you pay it could be no different at all if that's what you want, and that's one of the attractions. Anybody who likes to pay the same amount each month to help budgeting could continue to do so.

But the first big difference is that you can choose exactly what to pay and when to pay it without even speaking to the supplier and all the debate and discussion about fairness goes away. Another big difference is that it is obvious what you are doing and the confusion between direct debits and bills go away. And it's easy to keep track of where you are without resorting to spreadsheets, just look at the app or the IHD and you can see immediately where you stand. Lots of benefits with no real downside I can see.

Admittedly these are not things that many of the experienced forumites here really need but queries from people who struggle with this are a daily event. And from an energy supplier point of view the cost of the endless customer service queries associated with direct debits goes away as do problems associated with bad debt. Not everyone would gain much if FFDs were abolished but many would get the complete flexibility and control they want.

And who would lose?

matt_drummer

mmmmikey said:

And who would lose?

Those people who didn't build up enough credit in the low use months and don't have enough money to pay when they really need the energy?

What would happen to, potentially, millions of families that can't heat their homes in the winter?

mmmmikey

matt_drummer said:

mmmmikey said:

And who would lose?

Those people who didn't build up enough credit in the low use months and don't have enough money to pay when they really need the energy?

What would happen to, potentially, millions of families that can't heat their homes in the winter?

A fair question in my view. Here's my answer....

The same as happens to those people who are forced into having prepayment meters because they've refused to cooperate with attempts to agree a sensible repayment plan for whatever debt they've accrued. They would quickly learn the need to budget and spend their money wisely going forward. And there are lots of resources available to help them. It might sound tough but isn't forcing people to accept personal responsibility for their own situation really in their own best interests in the longer term? Of course, the existing checks and balances that are in place to support the vulnerable need to stay in place and might even need beefing up in the short term, but I don't think we should confuse vulnerability with disengagement or apathy.

matt_drummer

mmmmikey said:

matt_drummer said:

mmmmikey said:

And who would lose?

Those people who didn't build up enough credit in the low use months and don't have enough money to pay when they really need the energy?

What would happen to, potentially, millions of families that can't heat their homes in the winter?

A fair question in my view. Here's my answer....

The same as happens to those people who are forced into having prepayment meters because they've refused to cooperate with attempts to agree a sensible repayment plan for whatever debt they've accrued. They would quickly learn the need to budget and spend their money wisely going forward. And there are lots of resources available to help them. It might sound tough but isn't forcing people to accept personal responsibility for their own situation really in their own best interests in the longer term? Of course, the existing checks and balances that are in place to support the vulnerable need to stay in place and might even need beefing up in the short term, but I don't think we should confuse vulnerability with disengagement or apathy.

I agree, people should take responsibility for their own lives as far as possible.

But energy is different.

We live in a society where we cannot accept people being without heating in the winter, and quite rightly so.

Although I and many other people find the energy billing and payments easy to understand, many don't.

For whatever reasons, some people need assistance with budgeting and that is what the fixed direct debit does.

Some people will never mange their own finances in such a way that they build up a credit in the summer so they can afford heating in the winter, and because energy supply cannot normally be ceased, there needs to be a way to ensure that as few people as possible get into trouble.

Energy was quite cheap two years ago, now it is not, managing usage and payments is now even more critical.

This topic was about how much you could be in debt to an energy supplier in May.

Your answer is zero, the same as I think it should be.

Now energy is a larger part of most household's expenditure and with other rising costs, energy suppliers are seen as the `enemy by many and those companies having their money really irks them.

MattMattMattUK

matt_drummer said:

mmmmikey said:

matt_drummer said:

mmmmikey said:

And who would lose?

Those people who didn't build up enough credit in the low use months and don't have enough money to pay when they really need the energy?

What would happen to, potentially, millions of families that can't heat their homes in the winter?

A fair question in my view. Here's my answer....

The same as happens to those people who are forced into having prepayment meters because they've refused to cooperate with attempts to agree a sensible repayment plan for whatever debt they've accrued. They would quickly learn the need to budget and spend their money wisely going forward. And there are lots of resources available to help them. It might sound tough but isn't forcing people to accept personal responsibility for their own situation really in their own best interests in the longer term? Of course, the existing checks and balances that are in place to support the vulnerable need to stay in place and might even need beefing up in the short term, but I don't think we should confuse vulnerability with disengagement or apathy.

I agree, people should take responsibility for their own lives as far as possible.

But energy is different.

We live in a society where we cannot accept people being without heating in the winter, and quite rightly so.

Although I and many other people find the energy billing and payments easy to understand, many don't.

There does seem to be a wider issue here though, there are always going to be those who cannot understand, but in reality there will not be many of them, the bigger number seems to be those who choose not to understand.

matt_drummer said:

For whatever reasons, some people need assistance with budgeting and that is what the fixed direct debit does.

Some people will never mange their own finances in such a way that they build up a credit in the summer so they can afford heating in the winter, and because energy supply cannot normally be ceased, there needs to be a way to ensure that as few people as possible get into trouble.

I agree that we need to attempt to offer a better solution that the current one where some people run up debts, some people refuse to pay, others cannot pay and others still are confused by the large credits built up on the 6+ month billing cycles operated by BG and EDF.

matt_drummer said:

Energy was quite cheap two years ago, now it is not, managing usage and payments is now even more critical.

This topic was about how much you could be in debt to an energy supplier in May.

Your answer is zero, the same as I think it should be.

I agree again, people should not be in debt with their energy supplier, any more than one month if that is they are pay monthly etc.

matt_drummer said:

Now energy is a larger part of most household's expenditure and with other rising costs, energy suppliers are seen as the `enemy by many and those companies having their money really irks them.

Unfortunately a lot of the British public seem to have taken a very childish attitude to paying for things, from the things that they buy to taxes, society etc. The demands that food be made 20% cheaper, because Tesco/Sainsbury made £X billion profit, ignoring that their margin is less than 3%, or that energy suppliers have their profits capped (they already are) or that bills are cut back to where they were two years ago (the lights would go out, because we have to buy energy on the international markets), that they should pay less tax, when they already pay too little, that they should get more "free stuff" because they want it etc. That everything can be paid for by someone else.

I do not want to pay more for energy, but I accept it is what it is and in reality energy has been far too cheap for far too long, it has discouraged investment and it is why instead of being in a situation where we can generate most or all of our electricity needs domestically we are tied to a fluctuating international market largely controlled by despotic regimes and dictatorships. I also do not want to pay more for food, but again it has been too cheap for too long, even now we are not paying enough for it, milk and eggs are so cheap that farmers are paid below the cost of production for much of what they produce. 

As much as it was unpopular to say it publicly, when it was stated that we all need to accept a drop in living standards it was correct and that is something we need to discuss as a society, we all need to be less wasteful with food, use less energy, fly less, abandon fast fashion, stop buying new cars every three years etc. it is unsustainable both from a climate perspective and an economic one. The UK is loaded down with debt, not just government borrowing or mortgage debt, but also personal debt, used to fund holidays, cars, or in many cases entirely pointless spending. 6% of all consumer spending is on debt interest, that is an economic disaster. 

deano2099

MattMattMattUK said:

matt_drummer said:

Energy was quite cheap two years ago, now it is not, managing usage and payments is now even more critical.

This topic was about how much you could be in debt to an energy supplier in May.

Your answer is zero, the same as I think it should be.

I agree again, people should not be in debt with their energy supplier, any more than one month if that is they are pay monthly etc.

So do you both believe we should drop fixed direct debit as a payment option then? Or only allow it for accounts starting in March?
Because it's mathematically impossible to do what you're suggesting and also split an annual payment up into 12 equal chunks if those chunks start in winter.
I don't necessarily disagree with what you're saying about people shouldn't run a debt - but I think it's important to note that this means you have to be against fixed direct debit as a thing. As it just doesn't work that way.

deano2099

Variable direct debit is fine in theory but the problem lies in energy companies not sanity checking bills. We see so many instances in this forum of people receiving ridiculously high bills where a mistake has been made, a smart meter has broken down and they've used a totally incorrect estimate, etc. And we see that the energy company just send the bill and what a pain it often is to get that corrected. At no point do they go "hang on, this person has apparently used 10x the power this month than they normally do, maybe we should check this with them".

And if you've got a variable direct debit... well best case you have it linked to an account you use just for your energy bill, so you just go overdrawn there or get charged for a rejected payment. Worst case it's the same account you use for everything else and now your rent/savings/mortgage money are all gone until you get it sorted.
(Maybe there is some way of capping a variable DD? I'm not entirely sure as my current provider don't even offer it)

MattMattMattUK

deano2099 said:

MattMattMattUK said:

matt_drummer said:

Energy was quite cheap two years ago, now it is not, managing usage and payments is now even more critical.

This topic was about how much you could be in debt to an energy supplier in May.

Your answer is zero, the same as I think it should be.

I agree again, people should not be in debt with their energy supplier, any more than one month if that is they are pay monthly etc.

So do you both believe we should drop fixed direct debit as a payment option then? Or only allow it for accounts starting in March?
Because it's mathematically impossible to do what you're suggesting and also split an annual payment up into 12 equal chunks if those chunks start in winter.

It is only impossible if one expects twelve equal payments in the first year, or does not expect to pay a lump sum to stay out of debt if they join in autumn/winter. Personally I think we probably should drop fixed/budget Direct Debits a some point, they are an oddity, I cannot think of anything else that varies in usage but is paid for on a fixed monthly amount. 

deano2099 said:

I don't necessarily disagree with what you're saying about people shouldn't run a debt - but I think it's important to note that this means you have to be against fixed direct debit as a thing. As it just doesn't work that way.

It would be relatively easy to increase the amount for the first 3-6 months, the drop down to one twelfth, if someone joined in Winter, or have them pay a chunk initially. 

deano2099 said:

Variable direct debit is fine in theory but the problem lies in energy companies not sanity checking bills. We see so many instances in this forum of people receiving ridiculously high bills where a mistake has been made, a smart meter has broken down and they've used a totally incorrect estimate, etc. And we see that the energy company just send the bill and what a pain it often is to get that corrected. At no point do they go "hang on, this person has apparently used 10x the power this month than they normally do, maybe we should check this with them".

There could be some additional factors built in, that there must be a valid smart meter read, or a submitted read. Most variable Direct Debits default to a higher prediction of monthly usage if there is no read, usually about 20% over what would be expected. There could be some safeguards built in relatively easily, which might be easier if variable/whole monthly Direct Debit was a mandated payment method rather than optional. 

deano2099

MattMattMattUK said:

It is only impossible if one expects twelve equal payments in the first year, or does not expect to pay a lump sum to stay out of debt if they join in autumn/winter. Personally I think we probably should drop fixed/budget Direct Debits a some point, they are an oddity, I cannot think of anything else that varies in usage but is paid for on a fixed monthly amount. 

I agree with that but would add I can't think of anything that varies in cost but is paid for by direct debit. I'd have no problem at all if companies weren't allowed to charge more for "pay on bill".
(edit - phone bills!)

It would be relatively easy to increase the amount for the first 3-6 months, the drop down to one twelfth, if someone joined in Winter, or have them pay a chunk initially

Well yeah, that'd be sensible. But it's not how it's done at the moment. Instead energy companies review direct debits at seemingly random intervals and use some bizarre logic to estimate spend that no-one seems to understand. I'd fully support a process where everyone got an estimated annual bill in March, which then set their direct debit for the next year - and the following March they review it and you get a bill for any extra you spent or a refund of anything you didn't use.
I would imagine though, that were we to try and implement this, the energy companies would say this was too difficult, as it creates a significant chunk of work during the course of one month - not just the billing, but dealing with queries and so on.
The reality is the energy companies need their DD reviews and admin associated with them to be spread out throughout the year as they have the same number of staff working every month. 
Which goes back to my original point - if you want everyone to pay on fixed direct debit Mar - Mar, you have to bill everyone in March. If you want it split throughout the year, you have to accept that some people will be in debit at some points of the year.

deano2099 said:

There could be some additional factors built in, that there must be a valid smart meter read, or a submitted read. Most variable Direct Debits default to a higher prediction of monthly usage if there is no read, usually about 20% over what would be expected. There could be some safeguards built in relatively easily, which might be easier if variable/whole monthly Direct Debit was a mandated payment method rather than optional. 

There are definitely ways to do it but they don't exist right now, which is why I can't blame anyone from not wanting to risk it right now.