Many households are facing the stark reality of being unable to afford their energy bills this winter. Energy prices could spike at as much as £6,823 per year for the average household from next April, according to the latest forecast by energy consultancy Auxilion.
Consumers are currently hearing a lot about options for handling their bills, ranging from asking for help from their supplier to refusing to pay at all. PA has taken a look at the pros and cons of each, where to turn for advice and help - and explains what could happen if you choose the 'don't pay' option...
The ‘Don’t Pay’ option
The “Don’t Pay UK” group describes itself as “a grassroots movement demanding a fair price for energy for everyone”. More than 114,000 people have signed up to support a pledge to cancel their direct debits if the Government and energy firms “refuse to act” by October 1.
It says: "Mass non-payment is not a new idea, it happened in the UK in the late '80s and '90s, when more than 17 million people refused to pay the Poll Tax – helping bring down the government and reversing its harshest measures.
"Even if a fraction of those of us who are paying by direct debit stop our payments, it will be enough to put energy companies in serious trouble, and they know this. We want to bring them to the table and force them to end this crisis."
However, refusing to pay has serious consequences and households are strongly advised against taking this option – no matter how difficult their financial situation might be. If you are on a pre-payment meter, failing to pay will mean your supply being cut off.
If you are on a regular or smart meter and you do not reach an agreement with your supplier before cancelling your direct debit, the firm may try to force you to have a pre-payment meter installed. This means you will have to pay for your energy usage upfront and a weekly payment to cover any debts – which can be as high as 90% of energy top-ups and 100% of electricity top-ups.
Pre-payment customers also pay more than others. The current energy price cap is £1,971 for households with a standard meter, but £46 higher at £2,017 for those on a pre-payment meter.
Failure to reach an agreement with your supplier may also result in them applying for a court warrant so they can visit your home and disconnect your energy supply. This can be done remotely if you have a smart meter, but your energy company must visit you to identify and assess your situation.
An Ofgem spokeswoman said: “We know that people are under huge pressure, but we do not think it’s in consumers’ best interest to not pay their bills, and most leading charities and consumer groups agree.
“The knock-on effects of not paying bills can be huge for people. They could lose their direct debit discounts or be forced to move to a pre-payment meter. It could also damage their credit rating.”
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.
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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