Considering moving to variable DD for energy payments

SPE57

Just had an email from Sainsbury's Energy to tell me they are increasing my monthly dd. I had been expecting this given the increase in the price cap. I ran their figures through the MSE calculator and it looks about right, although they always overestimate our annual consumption despite having been with them for several years.

They have also told me that whilst I am in credit on the account I am not "enough" in credit! and they want a one-off payment to bring the account up to the level of credit they deem sufficient. If I don't make this payment they will increase my monthly dd by an additional amount so no pressure!!

I have never found it very easy to work out how Sainsbury's Energy arrive at the figures they come up with and trying to discuss this with them never seems to be very satisfactory. I am wondering whether the best way forward might be to move to a variable dd where I pay them month on month for the energy we have used. That way the money will be in my account rather than theirs until the bill is due. Are there any disadvantages with this strategy? Obviously, the monthly payments will vary and it will be up to me to put aside enough to cover the bills.

QrizB

Sainsbury's Energy are a white-label. The back-end is all EON Next.

Are there any disadvantages with this strategy? Obviously, the monthly payments will vary and it will be up to me to put aside enough to cover the bills.

You've identified the main disadvantage. If you can budget and aren't living from paycheque to paycheque, you should be OK.

Swipe

Are there any disadvantages with this strategy? Obviously, the monthly payments will vary and it will be up to me to put aside enough to cover the bills.

Just pay in monthly into an easy access savigs account with your current bank what you would have paid for your normal direct debit and then move the money into your current account when your bill arrives or just before the payment date. This is actually the best time of the year to start this as you now have time to build up a decent balance to cover the heavier monthly winter bills.

pseudodox

I pay this way & it is so simple to manage if you can be disciplined with higher bills in winter. I give my readings 1st of the month, receive a bill usually same day. DD is taken 10 working days later. I regularly update a spreadsheet so I know at any time what my next bill will be & just ensure the money is waiting. I spend less than 10 minutes a month managing my account. No underpayments, no overpayments, no requesting refunds or negotiating new DD levels. Just get on with more interesting things in life. Am relieved to be on minimal bills at the mo as had some other unexpected costs to deal with - I need the money avaible in my account not sitting in an energy company's bank.

Scot_39

Some suppliers are far more explicit in their new annualised DD plan.

Like Octopus and Ovo - now tell their DD customers their target is essentially a positive balance in spring - Mar / Apr.

See the "What do you consider a "healthy" balance ? " section here for the additional adjustment

https://octopus.energy/blog/direct-debit-payments/

Octopus have a tool for their users too - there's even you tube videos on it too

https://octopus.energy/blog/balance-forecast-explained/

Suspect Sainsbury's (reed EOn Next ?) will be doing something similar.

So for instance with Octopus - as that link if they predict your £120 short of that "healthy" balance target - Octopus say always correct over 12m - Ovo ?? - they would add £10pm.

Scot_39

https://forums.moneysavingexpert.com/discussion/comment/82063736#Comment_82063736

I'd say not ideal - maybe about 3 months late for many - if doing it on strict averages

Given Ovo and Octopus both use end of Mar / Apr for their respective targets (1m end Mar so covers use not yet billed in Apr bill iirc).

Youd have to pay a little more in now - but remember the OP is in credit - just not enough - and IIRC that will reduce their first variable DD - so that can be put aside too.

But even a partial reserve is better than none - as long as it doesnt create other issues (like crossing a savings threshold for any means tested benefits).

elsien

I have a bill account and I pay a fixed amount into it every month to cover all the utilities, based on my estimated usage for the whole year, council tax et cetera. So then it doesn’t matter when your winter bill is higher because the money is already sitting there waiting.

Swipe

https://forums.moneysavingexpert.com/discussion/comment/82063765#Comment_82063765

If someone doesn't have the disposable income to cover a higher winter bill on top of their acrued monthly savings, then maybe variable direct debit isn't the best option for them.

pseudodox

I have the same income every month, as do many. But I have more outgoings in certain months, particularly in summer when I have insurances, VED, MOT/service, a couple of other annual payments & holiday costs. In winter I often have nothing other than food & utility bills & most of those are set amounts (council tax, phone, water, TV) so there is always enough to cover higher energy costs. You cannot have one size fits all, and a lot of problems seem to arise because people have never learnt to budget (or been given guidance)

@SPE57

Only you can decide if you want to be in full control.

SPE57

Thanks for all the responses. Some interesting thoughts similar to my thinking, such as transferring an amount of money similar to the dd each month to an easy access account which can then be moved back when the bill is due. I reckon that until October the monthly bills will be less than the monthly dd so a chance to build up some credit and a very small amount of interest. Obviously the bills are significantly higher during the winter months but I would be in a position to make up any shortfall should this arise.

The prospect of trying to challenge the energy companies opaque reasoning is unlikely to prove satisfactory in my experience, and if there is an alternate course of action then this looks more appealing.

WiserMiser

Another vote for MVDD. It's not for everyone but you'll be fine because you've identified any potential issues.

Remember that some suppliers don't promote MVDD nor show it on the website (e.g. Octopus) so you may have to email or phone to set it up.