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177 MPs back Robert Halfon’s campaign on energy bills

Calling your energy company

Robert Halfon MP tells us how he’s pushing energy companies to ensure non-Direct Debit customers pay a fair price for paying their bill. With support from 177 MPs across the parties, he’s demanding action.

I was outraged to hear from a constituent that his elderly mother had received a letter from the Co-op Energy Company stating that she was going to be charged £63 extra unless she switched to pay her gas and electric bills by direct debit.

It is understandable that there is an extra administrative cost to not paying bills by direct debit, but £63 is excessive. Shockingly, upon investigation, I found that the majority of energy companies across the UK impose these extra charges, or instead, discount bills substantially for those paying by direct debit. This is particularly the case for the Big Six.

Penalised for paying by cheque or cash

Out of 32 energy companies surveyed, 17 energy companies charged more to customers who were not paying by Direct Debit. And figures from the Department of Energy and Climate Change show that the average annual surcharges were £114 in total – £41 for electricity and £73 for gas.

This is unfair, and hurts the low paid and vulnerable the most.

Some smaller companies charge their customers exactly the same regardless of how their customers pay their bills. These include Ecotricity, Good Energy, Green Energy UK, and LoCO2, and many water companies charge nothing or less than £5 for using other payment methods.

All companies should attempt to follow this example, as it shows that it is even more unreasonable for some of these companies to charge such exorbitant amounts.

Routinely ripped off by energy companies

The poorest and most vulnerable are routinely ripped off by energy companies when it comes to paying for the most essential of items, gas and electric. In the UK, 45% of people do not pay their electricity bills by Direct Debit. Those on lower incomes often prefer to manage their finances by paying for things with cash, and some people do not even have access to bank accounts.

Energy companies should make it clear to customers why they are being charged more for using a particular payment method and the price must be no more than what it costs the company to process the payment. I’m recommending £24 per year (£2 per month) as a reasonable limit to cover costs.

Many companies are including the cost of late payment and sending reminders in their justification for charging more for traditional payment methods. This is not fair on non-direct debit customers who always pay on time. These extra costs created by some customers should be paid for by late fees. In this way, the culprits are directly accountable and innocent people do not have to subsidise them.

There should be a government or regulator inquiry to look at why some companies are able to allow customers to pay by whichever method they prefer without incurring an extra cost. This would ensure that businesses are not hoodwinking vulnerable bill-payers, who might be unaware or unfamiliar with direct debit, into paying more than they have to.

I’d like to hear your views on these discounts, do you think the charges are fair? Have you been stung by these charges before?

Which? Conversation provides guest spots to external contributors. This is from Robert Halfon MP for Harlow, Essex. All opinions expressed here are Robert’s own, not necessarily those of Which?.

Comments

Skeptic,
You are quite correct. Some energy companies are operating legalised theft. This needs to be stopped. See my previous post on 3rd February 2014 ( post number 4).

Skeptic, clearly you have chosen to have your contract with a particular supplier for your own reasons. I am with npower and as I posted earlier, you get the same DD discount whether you pay monthly (fixed direct debit) or quarterly (for the amount of energy you have used). Might be worth a look? It is worthwhile submitting your meter readings monthly so there is less opportunity to be overcharged on a monthly DD.

It is reported today that British Gas and SSE are making around 11% profit on gas sales; double the accepted level. Can this be just a “windfall” profit or are they following the pack on price increases and, because of a dominant position, profiteering? We need Ofgem to report on this and decide what BG and SSE should do with any excess profit – return it to their customers would be top of my list.

Removing every member of the board and banning them from holding similar positions ever again would be top of my list.

julie woodward says:
19 December 2019

British gas is making so much money as they have most of the contracts for new builds ,and they can not change company`s.
I agree with you.
ofgem sould do more for the people and stop the greed

Colin Ellison says:
26 March 2015

Paying any of these companies by direct debit is a con!, if people are happy to do that then more fool them!, vast amounts of money are made by these companies collecting all the extra pounds most of you are happy to hand over, that is why they can offer big discounts, the actual cost of paper billing is minimal, course, to some, its a way of avoiding the big bills that come in spring, if that is a major concern, why not pay into an account you own, that way any interest gained will be yours, and money is there to pay the bill, I personally wont ever be browbeaten into paying by direct debit.

Colin Ellison says:
26 March 2015

Paying any of these companies by direct debit isn’t good!, if people are happy to do that then more fool them!, vast amounts of money are made by these companies collecting all the extra pounds most of you are happy to hand over, that is why they can offer big discounts, the actual cost of paper billing is minimal, course, to some, its a way of avoiding the big bills that come in spring, if that is a major concern, why not pay into an account you own, that way any interest gained will be yours, and money is there to pay the bill, I personally wont ever be browbeaten into paying by direct debit, because doing so commits the poorest people in our society to pay even more.

kurgamoppa says:
13 May 2015

I am a wheelchair disabled pensioner, we would like to pay direct debits for our energy bill on direct debit 4 weekly not monthly , so the bill could come out 4 days after our monthly payment, much easier for us,and probably may on any benefits, get paid ,then main bill paid? SIMPLE ? no ?ive been asking EON for last few years no response? Do any other reliable energy companies offer the 4 weekly direct debits x

julie woodward says:
19 December 2019

I am with Scottish power and been told I have to pay D.D when my fixed term ends.
I do not mind paying a little bit more to keep a quarter payment as I will get in debt on a monthly, how can any one on uc not getting paid for 5 weeks not get into debt, more stress.
I thing the government sould stop these company`s draining money from the poor they make enough money.
It reminds me of a guns and roses song(rich get rich while they bury the poor)

If you have not done so, you could contact Scottish Power, explain your position and ask for a way of paying that supports your income timing. I would have thought a monthly payment would be a better option, although a delayed start may help to allow you to accumulate a first month’s money. Maybe ask SR about this? https://www.scottishpower.co.uk/customer-services/bills-payments/

You can switch supplier, Julie, but paying by direct debit is generally the cheapest way of buying energy. It might be worth contacting your local Citizens Advice for help.

Yes- monthly direct debit energy payment is a con:

1) They engineer it so that over the year you are net in CREDIT with them, sometimes to the tune of hundreds of pounds per year. These are FREE LOANS. Just think- an energy company with 500,000 customers on monthly DD with an avearge of £50 in credit- Thats £25 Million as an indefinite FREE LOAN to the energy co.
2) When you use more energy it takes a while for your monthly bill to start going up (months or one year plus). So theres a disconnect between how much energy you use and what you pay. If I use more energy I want to see my bill quickly going up at the next quarterly (3 months) bill- SO I can investigate the cause or cut back. With monhly DD the water is muddied- I don’t see my bill go up quickly when I use more energy. Don’t you think the energy cos must know this and its another reason why they nudge us towards monthly DD?

I pay and always have done and always will Pay on receipt of a paper quarterly bill. Cheque or debit card at the post office. I check their estimates between meter reader visits against my meters and telephone them the actual reading if necessary. So my bills are always for what I use- no more & no less.
And I will NEVER have a smart meter- see here as to why (free on-line documentary)
https://www.takebackyourpower.net/

Jacqueline Ringrose says:
26 April 2021

Although some comments are over 5 years old ,the situation remains the same ,overcharged utility bills ,for not using Direct Debit . To add a further nail into the coffin .Sheffield City Council have now refused my use of a Green Bin, unless I pay the charge of use, by Direct Debit, or standing order .
It seems that Freedom of Choice ,is fast being removed from life ,in all matters.
Tell me again ,why we have a Government .

Hi Jacquelin,

There is a saying that “freedom isn’t free”.

Hence, I have no problem with utilities being allowed to offer lower prices to those who pay by direct debit. Presumably, those utilities have found that using direct debit reduces their costs of collecting payments and so they opt to share some of those savings with the customers who choose to pay that way.

If you think we should have a Government that is more focussed on eliminating inequality and/or taking better care of those on low incomes, I certainly agree.

That’s why I voted Labour at the last general election. But we lost and the people instead voted in a Conservative Government whose manifesto included taking away the ‘four freedoms’ enjoyed by EU citizens, i.e. the freedom of movement of people, goods, services and capital over borders.

I suppose, since the garden waste collection service is not a statutory function and is optional for residents, Sheffield City Council feels it is ‘free’ to lay down certain rules to make it as economical as possible. The alternative is for residents to take their garden waste to a free recycling centre or get a compost bin.

Given that councils generally sell the garden waste material commercially, and the number of users of the service has been growing year on year making the operation more efficient and economical, I am surprised that in our city, Norwich, the annual charge keeps going up and is now over £54.

Hi Jacqueline – I do not understand why it is cheaper to pay energy bills by direct debit but I presume that this is an incentive to ensure we pay regularly. I have known people who never paid before they received their reminder by post, which will increase costs. Energy companies are also keen for us to manage our accounts online so the cheapest tariffs are usually online ones linked to direct debit payments. In the past, two of the large companies kept pushing up my direct debits even though I was well in credit. I moved to another company that lets me adjust my own direct debit online and does not intervene if I have a small debit. Today I am £57.73 in debit but this will soon be wiped out because of the warmer weather. I know many people are not comfortable with using direct debit but customers are protected by a guarantee.

I would like Ofgem, the regulator, to look into the pricing of tariffs to find out if customers who don’t use direct debit are being overcharged. I object to customers being manipulated to suit the business models of businesses.

If, as I presume, automatic monthly payments like direct debits reduce the suppliers costs – guaranteed payment on a day, no handling correspondence, no chasing overdue accounts – then it is quite reasonable for those who help achieve those savings benefit from them.

There are, I think, more important issues to tackle.

First, why can I get a substantially cheaper tariff from a price comparison site – including Which? – than I can direct from a supplier, including the one I currently have a contract with? Last year I saved more than 30% doing this through USwitch, staying with my supplier compared with the best tariff they would offer me directly.

Second, why is there such a disparity between one year fixed price fixed term contracts and the same company’s standard variable offering. It seems clear in the past that the variable has been used to subsidise the fixed and, if so, that is wrong.

Genuine savings that energy suppliers make, and fixed price contracts are included, should be passed to customers but we should not manipulate prices for sales purposes.

Which? should not participate in a murky market where they receive payments from providers and offer special tariffs that suppliers do not offer directly. But, like other affiliate payments, it increases their income from dubious sources.