Martin Lewis has urged people to make sure their energy direct debit is correct - as they could be paying thousands more than they need to.
Speaking on this Martin Lewis Podcast, the money-saving expert explained Ofgem had introduced “tweaks” to energy prices this January.
This is because the Ofgem price cap has increased from £3,549 to £4,279 on January 1.
He told listeners that for most people, it wasn’t going to be a big change as households are covered by the Energy Price Guarantee.
However, some have seen their energy costs increase by a “material amount” due to regional differences in the Ofgem price cap.
The financial guru first explained how the Government’s Energy Price Guarantee worked, and how much the energy bills for each payment method - direct debit, prepayment and pay on receipt of bill - have risen slightly.
Martin told listeners that it was “absolutely worth checking” if their energy direct debit was correct - not just for the January tweak, but for the major rise which we saw in October last year.
The money saving expert said he had received lots of questions from people who said their direct debit had gone up “significantly” and some by nearly double after the 27% October rise and whether this was right or not.
He said: “If you are in debt, they may be increasing it to catch up on the debt because you were not paying enough, but if you’re in credit, the logic would dictate that your direct debit increase should be roughly in proportion to the price rise.
“If it’s 30 or 40%, you’re in the right ballpark, but if it’s 50, 60, 70, 80%, you want to check what’s going on.
“I would note that at this time of year, going into or just starting the winter, you would want to be in credit, that’s the whole point of the monthly direct debit cycle.
“It smooths out your usage, so you’re generally in credit when you go into winter and you’re in debt when you come out of it, but then in the low-use summer months, you start to build back that credit. That’s how it should work.”
He urged his listeners to check particularly if their direct debit has increased by more than 40% and they are still in credit.
He also advised listeners to make sure they have a working smart meter, which automatically provides readings, or to do a reading themselves, to make sure they are getting accurate prices for their usage.
Martin's first step to check is to use an "is your direct debit right" online calculator which should use the up-to-date January prices.
All you need to do is input your annual usage and it will estimate what your direct debit should be based on this.
If the estimate is well below what a person is paying, they can then put this figure to their supplier.
Martin added: “You want to politely call them up, tell them that you’ve done the calculation, and ask them to justify why your direct debit is going up so much, when you’re in credit and your prior usage does not indicate it.
“If it is too high, you want to ask them to lower it. You have a right under the energy firm's licence conditions to have a fair direct debit.”
The money-saving expert then shared the story of one Money Saver called Janet, who confronted her energy supplier after doing the calculation and found her energy bills were too high.
Her supplier lowered her monthly direct debit by £208 a month, which Martin said reduced her yearly bill by almost £2,496.
Martin said if the supplier refuses to change a person’s bill, the consumer does have the option to come off direct debit.
However, he cautioned against this, as most people then move to payment on receipt of bills, which could cost eight or 9% more than direct debit.
If this was the case, Martin suggested you move to a "variable direct debit" which allows you to pay according to your usage each month.
He added: "“It’s very similar to payment in receipt of bills, except because you’re using a direct debit, you get the much cheaper rate.
“The pro of this is you’re not paying any more than what you use.
“The con is monthly direct debit is actually a good idea to smooth out the usage, and it means in those expensive winter months, you’re getting to be shelling out a lot more than you would on a fairly set monthly direct debit.”
