Octopus increasing my direct debit

dosh37

In October 2024 I switched from a standard variable tariff to Octopus 12M Fixed October 2024 v1.

I received an email the other day to say they want to increase my monthly direct debit payments by 19%. That seems a lot when my energy usage has not changed. Have energy prices really gone up by that amount?

There is a MSE webpage that describes how energy bill credit is expected to vary throught the year:-

https://blog.moneysavingexpert.com/2023/3/martin-lewis--energy-bill-credit---how-much-is-too-much--stop-th/

The Octopus website provides an energy usage prediction and billing chart for the next 12 months.

If I accept the suggested increase, the chart indicates I will be in credit for the entire 12 month period. In effect I will be providing Octopus with an interest free loan.

Surely at this time of year when energy usage is highest, I should expect my payment credit to go negative for two or three months. 

I can adjust the monthly direct debit payment via the Octopus website but am unsure what amount would be sensible.

Gerry1

Just call or email them and ask for Monthly Variable Direct Debit.

Of course, you'll have to budget for higher bills in winter and lower ones in summer.

Keep_pedalling

What does your current balance look like? 

Scot_39

Many suppliers are moving towards full in credit annual cycles.

MVDD is not an Ofgem priced variant as yet - so not all suppliers offer it.

Iirc there was a posrt redently where Ovo are doing a one off corrective estimate over 16m not 12 m to ease the transition pain a little. The 0 minimum credit over cycle now In  their T&Cs for DD. Other posts suggest they actually used to but stopped doing MVDD years ago (due potentialky I suspect to its inherent added cashflow costs/even credit risk).

dosh37

Keep_pedalling said:

What does your current balance look like? 

I am currently about £100 in credit. The cyan line shows the predicted balance using the recommended monthly payment.

MWT

Surely at this time of year when energy usage is highest, I should expect my payment credit to go negative for two or three months. 

Octopus are very flexible when it comes to payments, but they do expect your account to remain in credit at all times and should not go negative.

Personally I tend to keep my monthly payments below their recommended level but I make a top-up payment on the few months over winter where the bill exceeds the balance on my account. This keeps the balance low but ensures that I do not go negative for more than a day or two.

It is easy to manage the DD level and make top-up payments using your online account.

Relatively new customers may not have the same degree of flexibility though so I do appreciate this may not work for everyone.

Scot_39

dosh37 said:

In October 2024 I switched from a standard variable tariff to Octopus 12M Fixed October 2024 v1.

I received an email the other day to say they want to increase my monthly direct debit payments by 19%. That seems a lot when my energy usage has not changed. Have energy prices really gone up by that amount?

There is a MSE webpage that describes how energy bill credit is expected to vary throught the year:-

https://blog.moneysavingexpert.com/2023/3/martin-lewis--energy-bill-credit---how-much-is-too-much--stop-th/

The Octopus website provides an energy usage prediction and billing chart for the next 12 months.

If I accept the suggested increase, the chart indicates I will be in credit for the entire 12 month period. In effect I will be providing Octopus with an interest free loan.

Surely at this time of year when energy usage is highest, I should expect my payment credit to go negative for two or three months. 

I can adjust the monthly direct debit payment via the Octopus website but am unsure what amount would be sensible.

Ignore Martin Lewis article - that chart showing in large debt balanced by large credit - is meaningless these days af many suppliers.

He isn't always right.

If you want DD discounted rates - live with it - the in credit its part of the cap pricing model.

MVDD isn't part of Ofgems pricing model - there is no cap for it.  If there was it's cost factors for cash flow and otentialky even credit default risk would make it more akin to now monthly standard credit billing at likes of EDF and OVO than those for DD.  And likes of Ovo now charge paper billing on top.

paradigital

I'm not sure where this suggestion that Octopus want you in credit at all times comes from?  Their own blog suggests not: https://octopus.energy/blog/direct-debit-payments/

My cycle has seen me in debt between Jan and May last year, and this year my own spreadsheet forcasts debt from Feb to April.  I'm currently paying around 12% more in DD per month than my average bill, but I set my DD myself after reducing it by over £100/month as I was in the best part of £2k credit due to their "really accurate" checks that set my DD far too high.

Gerry1

Scot_39 said:

MVDD isn't part of Ofgems pricing model - there is no cap for it.

AFAIK when it comes to capping, a DD is a DD regardless of which flavour it happens to be, MVDD doesn't bust a price cap.

If dozy Ofgem were any good they'd have instructed all suppliers to offer MVDD as an option.  Fixed DDs are widely misunderstood and with price caps changing every three months they're becoming even less relevant.

It would provide a level playing field and reduce the risk of dodgy companies using customers' credit balances as Ponzi-style cashflow and going bust, as many did.

pseudodox

Gerry1 said:

Scot_39 said:

MVDD isn't part of Ofgems pricing model - there is no cap for it.

AFAIK when it comes to capping, a DD is a DD regardless of which flavour it happens to be, MVDD doesn't bust a price cap.

If dozy Ofgem were any good they'd have instructed all suppliers to offer MVDD as an option.  Fixed DDs are widely misunderstood and with price caps changing every three months they're becoming even less relevant.

It would provide a level playing field and reduce the risk of dodgy companies using customers' credit balances as Ponzi-style cashflow and going bust, as many did.

Totally agree.  There should be options to suit everyone.  I totally understood that FDD works much better for many people - apart from those who think it is an "all you can eat" tariff or switch companies because A offers to set their FDD at a different level to B.   But what I fail to understand now is the number of posts we see on here where people tell us they are constantly revising their FDD amounts.  Some apparently even randomly paying extra into their accounts when they feel usage may exceed the amount they are paying because it has been a cold spell or they are having family visiting.  If you feel the need to change DD up and down as the usage/prices changes why not just opt for the simplicity of MVDD.

Does the energy company dealing with this constant shifting of goalposts really amount to less admin for them than taking an exact amount from me once a month that is the cost of exactly what I have just used?  I am not critcising anyone for the way they manage their account but I just puzzled why some seem to spend so much time chopping and changing.  I do nothing except submit monthly readings, check the bill tallies with my spreasdsheet, and keep an eye on my bank account balance when the DD is due to go out.  Job done.  Get on with my life.

EssexHebridean

Gerry is correct - DD is DD for the purposes of gaining the discounted rates which come with it, it’s irrelevant whether it is a fixed or a variable DD that is set up.


While Monthly Variable DD can work well for people, it’s absolutely vital that you have your budgeting absolutely under control. Ideally start with MVDD in the spring when use is falling and bills are lower. Work out what you estimate your annual use, and so cost, to be. Add on 10% to this to allow for price increases, then ensure that 1/12th of that total amount is set aside each month ready to cover the higher bills in the colder weather. MVDD is not for anyone who doesn’t budget properly, or who struggles with setting aside money against future costs for any reason. (That reason could be anything from simply impulse spending when money is there, through to a coercive relationship where any money in an account might be seen as fair game for a partner to withdraw and spend.)