Monthly direct debit regulation?

One-Eye

Are there any proposals to regulate the monthly direct debit amounts demanded by energy companies? If not, why are consumer champions like MSE not pushing for this?

Excessive amounts are still being demanded by energy suppliers. The worst personal example of this came before the recent rise in energy prices, I was with npower on a fixed tariff and it was mid-summer. I had estimated my annual usage costs as £890, and my account balance was near enough zero. The company's projection was £900 for energy - so very close to my calculation. I was happy to pay £76-£80/month, but they demanded £100/month. This was 25% too much and they effectively wanted me to lend them £300!

I believe that the algorithms used to calculate direct debit amounts should be examined by Ofgem so the consumer is not being exploited.

MSE_Stephen

This was a question submitted during one of our Ask an Expert events. It wasn't selected to be answered by our expert(s) but we've left it open for our users to share their insight.

Brie

I agree that there should be regulation on this.  So often energy companies will say the DD needs to be what you might pay in a month in the winter rather than an average for the year.  And they want you to do everything yourself online but won't let you reduce your DD.  Even if they admit the DD has been set too high.  

Energy companies should also all have variable DDs available for those that don't want to pay a fixed amount year round.  I've no idea why that can't be done - every credit card you have will be set for a variable amount, unless you as the customer choose otherwise.  

wiseonesomeofthetime

I am with Octopus Energy and indeed do pay via variable direct debit. No issues at all.

eskbanker

Surely this is one for the energy board rather than the banking one, in that it relates to the calibration of requested payments versus projected bills rather than the actual DD process itself?

dunstonh

Are there any proposals to regulate the monthly direct debit amounts demanded by energy companies? If not, why are consumer champions like MSE not pushing for this?

It seems to be down to a lack of understanding by many people that the monthly direct debit is an estimate and needs to be set to the correct level.

Excessive amounts are still being demanded by energy suppliers.

Which is easily resolved if the individual puts in just the smallest amount of effort to understand their use and its cost.

I was with npower on a fixed tariff and it was mid-summer. I had estimated my annual usage costs as £890, and my account balance was near enough zero. The company's projection was £900 for energy - so very close to my calculation. I was happy to pay £76-£80/month, but they demanded £100/month. This was 25% too much and they effectively wanted me to lend them £300!

npower seems closer to an accurate figure for budgeting then yours does.

Yours would likely see you in debt by late winter as you had no summer credit depite it being mid summer.   The point where you stop using credit is usually around mid-spring (late April) and you start building credit again by late Spring.   As you go into Autumn to Winter, you use the Summer credit you have built up and if all has gone to plan, you should be at zero around April/May and the cycle starts again.

So, some of their calculations include an amount to prevent you from going into arrears and moving your summer credit building a few months earlier than you are currently doing.     Plus, they will consider pricing on a typical year's weather.  Not mild years.

Its not a perfect system as nothing that relies on estimates and is at the whim of variables can produce such a thing.   However, a lot of the issue is down to the end user failing to understand how the system works.

born_again

Note that the OP is from 2023 & a lot has changed.
Perhaps MSE on moving these, would like to make it clear about the actual posting date.. Or more effectively, review the post from the old forum & decide if it is still relevant now.

Ofgem now seem to have said that people are supposed to be a month in credit in April. From the many recent posts on this subject.

QrizB

born_again said:

Note that the OP is from 2023 & a lot has changed.

I was wondering about that.

nPower haven't been a domestic energy supplier since 2021.

One-Eye

dunstonh said:

I was with npower on a fixed tariff and it was mid-summer. I had estimated my annual usage costs as £890, and my account balance was near enough zero. The company's projection was £900 for energy - so very close to my calculation. I was happy to pay £76-£80/month, but they demanded £100/month. This was 25% too much and they effectively wanted me to lend them £300!

npower seems closer to an accurate figure for budgeting then yours does.

Yours would likely see you in debt by late winter as you had no summer credit depite it being mid summer.   The point where you stop using credit is usually around mid-spring (late April) and you start building credit again by late Spring.   As you go into Autumn to Winter, you use the Summer credit you have built up and if all has gone to plan, you should be at zero around April/May and the cycle starts again.

I have energy records on a spreadsheet going back years. Midsummer is June - so there were several "warm" months remaining that year to build up a balance.

At £80/month, my balance over the next few months would increase, reaching £104 in October. It would then fall to a low of £35 in March before increasing again. I would have never been in debt.
At their suggested £100/month my balance would increase each month reaching £220 in December. It would fall to £207 in January (January at £113 was the only month with a bill over £100!) before increasing again reaching £305 in May.

My original post dates from September 2023 and was posted as a potential question for an OFGEM representative. MSE have split this out as a separate thread. The npower episode described actually dates from the mid 2010's and caused me to move to a different supplier as they would not listen to reason and reduce the direct debit. I have had similar episodes with all my suppliers since then, but without fail, they have all responded quickly when I contacted them and set the direct debit to a reasonable amount. The latest was just a couple of months back when Octopus proposed £108/month - reduced to an accurate and reasonable £92 promptly after my first contact with them. I still think that OFGEM should get involved to stop the rip-off of people less willing to engage with their suppliers. In June 2025, energy companies held £3.09 billion of customers balances.

QrizB

One-Eye said:

I still think that OFGEM should get involved to stop the rip-off of people less willing to engage with their suppliers. In June 2025, energy companies held £3.09 billion of customers balances.

Ofgem are involved, but not in the manner you seem to expect.

Ofgem now require energy companies to minimise debit account balances, with the result that energy cos are encouraged to hold more customer credits than before. In addition Ofgem (urged by central Government) has made it difficult for suppliers to reclaim debts from intransigent customers.

£3.09 billion is about £120 per customer, very roughly one month's payment.

debitcardmayhem

QrizB said:

One-Eye said:

I still think that OFGEM should get involved to stop the rip-off of people less willing to engage with their suppliers. In June 2025, energy companies held £3.09 billion of customers balances.

Ofgem are involved, but not in the manner you seem to expect.

Ofgem now require energy companies to minimise debit account balances, with the result that energy cos are encouraged to hold more customer credits than before. In addition Ofgem.jas made it difficult for suppliers to reclaim debts from intransigent customers.

£3.09 billion is about £120 per customer, very roughly one month's payment.

Yes and they have over £4 billion of arrears too