Families who pay their energy bills by direct debit will be spending an average of £2074 on their gas and electricity from July 1, regulator Ofgem announced this week.
Direct debits are the cheapest way to pay for your energy, with households who pay when they get their bills forking out £2,211 or £137 more per year on average. But it's important to understand how your payments are set and reviewed by your energy supplier and how they arrive at the monthly figure you pay. Even though the new price cap is less than the Energy Price Guarantee (EPG), energy costs are still double what they were at the beginning of the cost of living crisis, so it's important to keep an eye on your payments.
Read more: Save more than £100 by changing the way you pay your energy bill
Many have taken to social media to ask why they have been asked to pay a monthly amount in excess of the energy they are using and the answer to this question is simple: Monthly direct debits work by smoothing out the peaks and troughs of your bills throughout the year, and you'll pay the same amount every month. So even though you might use less energy than you are paying for now, you'll reap the rewards in winter, when you will have the same monthly payment even though you will be using a lot more energy. It means you avoid any shock bills in colder weather when the heating is on more, but your bill won't go down when it gets warmer.
Typically, people build up credit during the summer months to cover the winter period when their usage is higher. You should be starting to build up credit now ahead of winter so if you currently have a small credit on your account it might not be worth getting it refunded as it might leave you short in the colder months.
And remember, the new price cap is the amount a household with average use will pay. If you use more, you will pay more.
If you would prefer to pay for your energy as you use it, you might might be able to opt to pay your bills with a variable direct debit instead. Paying this way usually means you qualify for any discount available to direct debit customers, although not all energy firms allow variable direct debits. However, remember that the amount paid each month will fluctuate depending on your actual usage, so your bills will be much higher in winter than summer, which is great news now but not so good in six months time.
Households paying by monthly fixed direct debit risk inaccurate bills if they don't regularly submit meter readings unless they have a smart meter which gives them automatically. Natalie Mathie, energy expert at Uswitch.com, told The Sun: "The more frequently your supplier checks that your direct debit matches your usage, the more likely it is that you will be paying the right amount each month."
How and when your direct debit is reviewed differs from supplier to supplier. Here we explain how the biggest eight suppliers set direct debits and how customers can request a credit refund.
British Gas
How fixed direct debits are calculated: British Gas works out the cost of your energy for the year ahead and divides this into 12 instalments. Customers are sent a statement every six months, which is the point the supplier will check that you're not paying too much, or too little. If British Gas wants to change the amount you're charged by direct debit, it will let you know 10 working days before it's applied.
How do you ask for a credit refund? British Gas rules state that it will always hold a £75 energy credit on accounts and will only refund you if there's £5 or more left over that. Remember, because of the six-month billing cycle, your monthly payments will build up until a bill is produced. So it can sometimes look as if you have a large credit on your account, but this may well be wiped out with your next bill. If you want a credit refund, click on "View payment plan" in your online account, scroll down to "Refunds" – and then check if you can claim some cash back. You can also request a credit refund through the live chat on the British Gas website or by calling 03330 100 0056.
E.ON Next
How fixed direct debits are calculated: E.ON Next will work out the cost of your energy for the year ahead and divide this into 12 instalments, which the supplier will then review direct every three months to make sure that you're not paying too much or too little. Because of the short review time, some months may be higher than others to take into account seasonal energy usage. although E.ON Next will give you 14 working days notice if it wants to change the amount you're charged by direct debit.
How do you ask for a credit refund? You can email hi@eonnext.com with "Credit Refund Request From Account No. XXX" in the subject header. State your name, address, account number and state how much money you want refunded, along with photographs of your gas and electricity meters if they aren't smart.
EDF Energy
How fixed direct debits are calculated: EDF will work out the cost of your energy for the year ahead and divide this into 12 instalments and will review the amount you pay every six months to ensure that your bill is reasonably accurate. EDF might review your direct debit before this if, for example, you send in a recent meter reading, but this isn't always guaranteed. If EDF wants to change the amount you're charged by direct debit, it will let you know 14 working days before it's applied.
How do you ask for a credit refund? Send your meter readings via your EDF online account or on the app, then request a refund by phoning 0333 006 9950.
Octopus Energy
How fixed direct debits are calculated: Octopus Energy will work out the cost of your energy for the year ahead and divide this into 12 instalments, which are reviewsed every three months to make sure that you're not paying too much, or too little. If Octopus wants to change the amount you're charged by direct debit, it will let you know 10 working days before it's applied.
How do you ask for a credit refund? Ask for a refund online or by phone. If Octopus Energy thinks that you've got more credit on your energy account than you need, you'll be able to request some back as long as you've had an energy bill based on real meter readings in the last 30 days. Hit the little button underneath your balance on your online account dashboard., or if you don't see an option on your online account, email hello@octopus.energy or call 0808 164 1088.
Ovo Energy
How fixed direct debits are calculated: Ovo Energy will work out the cost of your energy for the year ahead and divide this into 12 instalments, which are reviewed every month although your payment amount will only change after three months. If Ovo Energy wants to change the amount you're charged by direct debit, it will let you know 10 working days before it's applied.
How do you ask for a credit refund? Ovo Energy customers can request a refund if their credit is at least £25 higher than one month's direct debit and the best way to apply for it is online. After submitting a meter reading, head to the payments page and click apply for a refund.
Scottish Power
How fixed direct debits are calculated: Scottish Power will work out the cost of your energy for the year ahead and divide this into 12 instalments. The supplier says it reviews direct debits "regularly" and at least every three months to make sure that you're not paying too much, or too little. If Scottish Power wants to change the amount you're charged by direct debit, it will tell you 14 days in advance.
How do you ask for a credit refund? The best way to reclaim a credit is online. Log in to your online account and provide up-to-date meter readings and the supplier will check if your account is eligible for a refund. If you do require a refund you'll need to request it by using the live chat function on the Scottish Power website.
Shell Energy
How fixed direct debits are calculated: Shell Energy will work out the cost of your energy for the year ahead and divide this into 12 instalments, which are reviewed every three months. If Shell wants to change the amount you're charged by direct debit, it will let you know 14 days before it's applied.
How do you ask for a credit refund? Ask for a refund online by using the live chat function on the Shell Energy website. You can also call on 0330 094 5800.
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So Energy
How fixed direct debits are calculated: So Energy will work out the cost of your energy for the year ahead and divide this into 12 instalments. The supplier reviews direct debits every six months to make sure that you're not paying too much, or too little and if it wants to change the amount you're charged by direct debit, it will let you know five working days before it's applied.
How do you ask for a credit refund? If you have a credit on your Scottish Power account and wish to reclaim it, it needs to be worth at least £30 and you must provide an up-to-date meter reading. Email help@so.energy or call 0330 111 5050.
Read more:
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