The energy price cap will rise yet again in October, soaring to £3,549 in the autumn. Regulator Ofgem announced the increase on Friday (August 26) and said the new price cap will last for three months until October 1.
But from January, analysts expect the cap to rise again to £4,200. The announcement came amid the worsening cost-of-living crisis, with petrol and household item prices soaring and taxes and interest rates also going up.
Households have been told to brace for a tough winter, with families having to come up with the money to pay bills or face living in the cold. It is believed that around 24 million households in the UK have their domestic energy bill decided by Ofgem's price cap.
A price cap is also decided for customers on prepayment meters which are separated from those with variable tariffs. As a result of the increase, many bill payers are thinking about cancelling their direct debits from October and refusing to pay the extortionate rates in a stand to try and lower costs.
The Don't Pay UK campaign is nearing 115,000 signatures, reports the ECHO. However Money Saving Expert Martin Lewis has warned against this as he advised that consumers need to make an informed decision and understand the risks of being in breach of their contracts with energy suppliers who could enforce a pre-payment meter, cut off energy supply or impact consumers' credit scores negatively.
Elsewhere, there are people who simply can not afford the new energy rates and as a result they may miss payments. Les Roberts, content manager at Bionic provided guidance on what your rights are if you can't or won't pay your bills.
What can your provider do if you can't or refuse to pay?
Your energy provider does have the right to take action if you stop paying your direct debit and begin to rack up debt. They could potentially move you on to a prepayment meter, which means you would most likely be paying a higher rate. A prepayment meter requires you to pay for energy as you use it.
However, you do have some rights as a consumer before this happens. Your supplier has to give you at least 28 days to repay your debt before they take action.
They cannot enter your home and install a prepayment meter without at least seven days prior warning. Your supplier should offer you a repayment plan or help you to arrange repayment through your state benefits before they install a prepayment meter.
You can also refuse a prepayment meter if you are unable to physically reach your meter or top up the balance at a shop. For example, if you are disabled or ill or live very remotely.
Do note that if all the above conditions are met and you still refuse to pay, your supplier does have the right to gain a warrant to enter your home and install the meter or they could change your smart meter setting to a pay-as-you-go set up.
Can not paying for energy bills affect me in the future?
Not paying your energy bills can have a negative impact on your credit score, which could make it harder to borrow money in the future. Although you pay for your energy as you use it (this is the case for both domestic prepayment and credit meters) credit reference agencies can be notified for non-payment of utility bills.
Your supplier could pass your account onto a debt recovery service, and you may even be hit with a County Court Judgement (CCJ). Even if you then repay the debt, a record of a CCJ will stay on your credit file for six years and can make it harder to borrow money.
Can I switch to another provider if I am in debt?
As prices skyrocket you may decide to shop around for the best deal, using a comparison website. It is important to be aware that if you have been in debt with your current provider for more than 28 days your switch might be blocked.
But your supplier can’t stop you from switching if it’s their fault you’re in debt. If you have a prepayment meter, you can switch if you’re in debt, so long as the amount you owe is £500 or less per fuel. In this instance, the supplier you switch to will take on the debt and you will repay them instead.
Can your energy provider cut you off if you refuse or can't pay?
If you can’t agree a repayment plan with your supplier and refuse to have a prepayment meter installed, then your supplier can begin steps to disconnect your supply. Your supplier can disconnect your supply in the following circumstances:
- If you haven’t come to a repayment agreement and refuse to have a prepayment meter installed without a valid reason (for example, an illness or disability stops you from accessing, reading, or using the meter).
- If you do arrange a repayment plan but miss an instalment, your supplier can start action that could lead to disconnection after 28 working days from the date you missed the payment.
- If you haven’t paid after 28 days from the date of your bill, your supplier can start putting the wheels in motion to disconnect your supply.
Disconnection can only be considered when all other options have been exhausted and both gas and electricity suppliers must give you seven days notice before they do it.
Ofgem has stated that suppliers should do everything in their power to avoid disconnecting your supply especially if you are ill or disabled and they are not allowed to disconnect the supply of a person who is above the state pension age or lives alone between the colder months of October to April.
Moving off direct debits to paying for what you use – or a ‘standing order’
As households’ monthly direct debits soar by hundreds of pounds, many are considering stopping them and paying for the energy they actually use in three-month chunks in the form of a standing order. While this may give a sense of control, anyone paying on receipt of a three-monthly bill for actual usage will pay considerably more than direct debit customers as almost all providers add a discount for direct debit payments, reports PA news agency.
Gillian Cooper, head of energy policy for Citizens Advice, said: “Paying as you go can give you more control over the amount you pay, but you might pay more for that control. It’s unlikely that you would save money by moving to pay-as-you-go, because you can’t spread your costs over a year.”
Direct debits remain the best option
Despite sickening increases, staying on a direct debit plan remains the most cost-effective option for paying for your energy. However, customers have the right to challenge any increase that goes above the increased price cap.
Ofgem is carefully monitoring this and has already warned firms that direct debits must be set correctly and they must “clearly communicate any changes in a way that helps consumers understand their payments”.
I’m really struggling, where can I turn?
You should first contact your supplier and notify them that you want to pay off your debt through a payment plan. They should discuss your options with you and come to an agreement.
When coming to an agreement, your supplier should consider what you can afford to pay based on your income, outgoings, and any other debts you have. They will also consider how much energy you are likely to use in the future by looking at your past usage.
To ensure your energy bill is accurate, send your supplier readings from your gas and electricity meter. It is very important to resist, if at all possible, being moved on to a pre-payment meter as this is the least cost-effective way of paying for energy.
Rocio Concha, Which? director of policy and advocacy, said: “We strongly encourage anyone concerned about being able to pay rising energy bills to speak to their supplier as energy firms have a duty to agree a payment plan that households can afford.
“Depending on the supplier, customers can ask for a review of their payments, a reduction in or break from their payments, more time to pay or access to hardship funds.”
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Everything you need to know about the energy price cap change
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