Answers to questions about debts and credit ratings - in plain English!
The average UK household annual energy bill is now expected to jump 70% to £3,358 in October.
Cornwall Insight predicts that in January 2023 there will be a further increase to about £3,600. That’s almost treble what it was at the start of this year.
The government’s current help with energy bills, including £400 off everyone’s electric bill this winter, and cost of living assistance to people on benefits, doesn’t come close to covering these huge increases. One in three households is now expected to be in fuel poverty from October.
Most of the government help is also being given as a “one-off” in 2022. But there is no sign that energy bills will start dropping soon. Cornwall Insight expects them to stay well above £3,000 throughout 2023.
Much more help is needed. But this may not arrive by October, or it may not be enough for your household.
None of these is an easy solution.
Reducing your energy usage can be very hard, bad for a range of health conditions and can lead to a damper home. Self-disconnecting with a prepayment meter may lead to debt as the standing charges are still added on every day. Cancelling a direct debit brings several problems – see below.
Before you choose any of these options, read Can’t pay your bills & debts? What can you do and what help can you get? That looks at other help you may not know about. And energy bills are priority debts – this means that you should stop paying non-priority debts such as credit cards and loans to be able to pay your energy bills.
I agree with the Don’t Pay UK campaign’s aims when it says:
Millions of us won’t be able to afford food and bills this winter. We cannot afford to let that happen. We demand a reduction of bills to an affordable level.
The campaign is proposing to put pressure on the government and the energy suppliers by getting a million people to pledge:
We will cancel our direct debits from Oct. 1 if we are ignored.
But should you decide to do this?
The DontPayUK website doesn’t explain fully how cancelling an energy direct debit may affect you. I think it should set out these risks so you know what may happen.
You will probably be charged a fee if you fail to make a payment – this should be set out on your supplier’s website.
But this isn’t the only extra cost. Paying by Direct Debit is the cheapest way to pay for electricity and gas. If you cancel a Direct Debit, your energy supplier will start sending you bills that will be at a higher rate.
After the 54% price rise in April, many people thought their energy supplier was increasing their Direct Debit too much and they wanted to have more control over what was taken. Martin Lewis estimated it would cost over 6% more to pay by quarterly bills instead of Direct Debit.
Energy firms report to the Credit Reference Agencies such as Experian, Equifax and TransUnion.
Missed payments and defaults on an energy bill can harm your credit score in the same way that missing a payment to a loan or credit card would.
Cancelling a Direct Debit doesn’t necessarily mean you will miss a payment, if you pay very soon by bank transfer.
I have seen suggestions on social media that your credit record won’t be damaged if you make a complaint at the same time as cancelling your direct debit. A complaint can go first to your supplier and then to the Energy Ombudsman.
It is correct that an energy supplier should not harm your credit record if there is a potentially valid dispute about a bill. But I don’t think saying you cannot afford the ongoing bills as the prices are too high would be seen as a valid reason to complain.
UPDATE on 5 August, Don’t Pay UK added two new sections to their FAQs on Will striking affect my credit score? and Will striking affect my mortgage repayments?
When you miss a payment, your energy supplier will want you to make an arrangement to pay your ongoing bills plus some extra towards the arrears.
The supplier should take into account your financial circumstances in setting the arrears payment, But the problem for millions from October will be that they cannot afford the ongoing bills, let alone any extra towards the arrears…
If you have arrears and do not make an arrangement to pay and then start paying it, your supplier is likely to tell you they’re going to move you to a prepayment meter. It is common for prepayment meters to be fitted because of arrears.
They can get a Warrant from a Magistrates Court to enable them to enter your home and fit a prepayment meter.
If you have a smart meter, it is possible that could be switched to being a prepayment meter – this is called “remote switching” as no-one has to enter your home. Before this happens, your supplier must have:
You may be able to argue you cannot have a prepayment meter for health or access reasons, see When you can refuse to be moved to prepayment.
Paying for your energy by prepayment meter is more expensive than direct debit. You may be forced to restrict your energy usage a lot and even self-disconnect for periods.
I have seen some “experts” saying in newspapers that you could get a CCJ and bailiffs if you stop your direct debit and get into debt. A bailiff cannot visit for an energy debt unless the creditor has got a CCJ.
Although it’s not impossible, this hasn’t been a problem in the past for arrears that build up for your current property.
Suppliers prefer to go to the Magistrates Court to get prepayment meters fitted, where they can then get payments deducted for the arrears. Going to the County Court for a CCJ is a much slower process and may not result in the supplier being paid.
Suppliers do go to court for a CCJ for debts that relate to a previous property, because in that case they cannot make you have a prepayment meter.
Disconnections used to be common. 20 years ago there could be more than 15,000 in a year.
But then suppliers started getting prepayment meters installed instead.
By 2016, there were just 216 disconnections. In 2018, it had dropped to 6.
Not paying an energy bill is not a criminal offence. You cannot be sent to prison for this.
Meter tampering, to by-pass a meter or make it run slower, is a criminal offence you can go to prison for. It can also be dangerous and result in fires – don’t even think about it. The Don’t Pay UK campaign is not advocating any of these illegal and unsafe options.
(An aside – another thing to ignore is any adverts for devices you can plug in that claim to reduce your energy consumption. They don’t work. Don’t waste your money on scams.)
I have listed the problems that may happen if you cancel your energy direct debit. But how likely are they and how long would they take to happen?
The DontPayUK campaign points out that the Poll Tax was scrapped after millions refused to pay it. But 1990s council tax payments were a largely administrative process that could easily be brought to a halt. And not paying the Poll Tax did not show on your credit record.
Energy billing in 2022 is very different. It is very likely that adding late payment charges, removing the DD discount and reporting missed payments to the CRAs are totally automated and would happen within weeks. It won’t make any difference if your supplier has to do this for 1,000 customers or 100,000.
Fitting a prepayment meter is a much slower, manual process. First the energy supplier has to try to get you to set up an arrangement to pay. For just a few customers who refuse to set up an arrangement, it could take two or three months to fit a prepayment meter.
But there aren’t a million prepayment meters ready to be fitted in the country. There aren’t the trained staff to fit them. And it would clog up the magistrates’ courts if people wanted to object… So if the DontPayUK campaign takes off, you would be pretty unlucky to be one of the few that has a new prepayment meter fitted quickly, but it’s not impossible.
There is a larger risk that if you have a smart meter, this will be switched remotely to act as a prepayment meter.
After you have covered your essential payments – rent/mortgage, feeding the family, filling up the car so you can get to work etc – there may not be enough money left to pay the direct debit your energy company wants.
You may be worried about the consequences of canceling the energy Direct Debit.
Talk to a debt adviser about whether there are any other options, such as dealing with your non-priority debts. Or if there is any other help you can get with your finances.
When there are no easy options, it’s important that you know the facts so you can make an informed choice.
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August 3, 2022 Author: Sara Williams Tagged With: energy crisis, Priority debts
What if you have a large sum that has accumulated with your energy provider ready for winter? Can you spend that up first and cancel your direct debit until it runs out? Seems if people are in credit the utilities win again by getting interest on all those credit accounts? It made sense to spread the cost over the year to cover the increased usage in winter, but not so much now?
How large an amount are you in credit? And what is your current DD?
I think you should talk to your energy supplier about this. You don’t want them to remove your discount for paying by DD. You could ask for a refund of some of that money or suggest that you can lower your DD to £200 a month and review it in January say?
You could invest that in a savings account or stock market and have it generating some income for you rather than sitting in the energy crooks bank account.
I have the energy supplier “recommended amount” go into my bills account every month, and my Direct Debit with energy company set up at £40/month (the minimum I’m allowed). Then when I get my bill I just pay the difference from my bills account. That way I never pay for more than I use and my excess money is kept in my own account for me to use as I see fit.
It would be madness to invest that money in the stock market. On the best easy access savings account it would get about £20 if it was used up over the course of year in paying energy bills. And about £10 if it is used up over the next 6 months in paying energy bills. It feels annoying leaving so much money with an energy firm, but actually you are losing little interest. So the simplest approach may well be what i have suggested – talk to the energy supplier about significantly reducing the DD so the credit gets used up over this winter.
From a debt adviser’s perspective, and I am one, the “narrowing” of traditional options for energy debt is becoming a major concern:-
– Negotiate a plan for ongoing usage and something off the arrears. Bill payers cannot afford ongoing usage let alone arrears contribution, so this is a very limited option
– Consider the use of Fuel Direct scheme, ie direct deduction from benefits. An archaic and disliked scheme, most bill payers just cannot afford the likely level of deductions . Barely an option from an adviser’s point of view!
– Consider grant applications to write off/clear arrears
Some energy suppliers have their own grant schemes, but they are overwhelmed with applications, with no guarantee of success. More guidance required I feel on the kind of client and levels of debt they are looking to support specifically,.
Looking the more likely of all options but has its pitfalls as mentioned in the article. For those on Smart Meters possible automatic switch to that mode by supplier. Costly alternative
Sure, can quash the arrears and other qualifying debts so some benefit to those who choose it. But a major concern that in say 9 months time the client will be back in the same position
So from a debt adviser’s world – where do we go with this??
Limited and often impractical options.
Hi, can you cancel your energy direct debit and pay by standing order? Eg: an amount you can afford each month?
yes you can. You are likely to be getting into arrears, but obviously more slowly than if you simply stopped paying at all. But you will lose the “pay by DD discount” so its more expensive. And if you are getting into arrears your credit record may be harmed.
I am a pensioner and have already opted to change from direct debit to pre-payment simply because I wouldn’t have enough money in my account to meet the £98 (gas and electric) on a set day every month. It’s taken two weeks of calls, texts and emails to get British Gas to agree to this. I have arrears of about £60 and they say this will have to be paid at £4 a week (which they say is the minimum amount they can take). And, yes, it does mean there will be fewer showers and less heating this winter. But if rather that than a bill of hundreds of pounds landing on my doorstep in the future.
If you don’t think you can afford £4 a week, you should send a complaint about this. If you talk to your loacl Citizens Advice they can help you supply and income & expenditure statement that shows what you can afford.
Thank you Sara. The £4 a week will be affordable – just. I mentioned it just in case other readers here, in a similar position, are quoted different higher weekly amounts to pay arrears.
The whole thing scandalous the government could do more to help
British gas are asking me to pay over one thousand pounds a month and I’m a pensioner
what were your previous direct debits? Have you just had a fixed rate end?
My supplier EDF has just landed me with bill for £1600 with no explanation of how this has arisen. We have been paying £140 a month DD and haven’t had a statement to show how this amount has grown. I have cancelled my DD until they prove we have incurred this debt
have you phoned them up and asked?
Shop around, if it’s not too late. I cut my bill a month ago by £130 monthly, by moving to Utilities Warehouse on a fixed rate package, so no rise for me for a year. Fixed rate is definitely the way to go.
There are very few fixed rates currently available for people looking to change suppliers. MSE has a list of them that is updated frequently here https://www.moneysavingexpert.com/utilities/-are-there-any-cheap–fixed-energy-deals-currently-worth-it–/.
Utility Warehouse is a possibility at the moment. But this is fast moving – their Green Fixed 33 tariff available yesterday has now been replaced by Green Fixed 34 that is more expensive. And UW also comes with considerable complications – you have to sign up to at least two more services from broadband, mobile and boiler insurance. These are not generally the cheapest options available. And if you have existing contracts for these, you may not be able to cancel them without extra charges. See https://www.moneysavingexpert.com/utilities/does-utility-warehouse-stack-up-/. For someone with a high usage, the disadvanatges with the other contracts you have to take on may be worth it.
Like MSE I have huge reservations about UW’s newtwork marketing.
And if UW did go bust (like MSE I have no information on that) you would be moved to another supplier and back onto the price cap – but you may be stuck with the other services you have signed up for that arent particularly cheap.
Nina de Salis Young says
I had a client who could not afford her Utilities Warehouse bill. Trouble was that her package with them included her phone and broadband. They cut off her phone and broadband after a month when she could not pay. We managed to help her sort it out, but it was, and is, very scary for her, having all her communications tied to the utility bill.
“Insulate Britain” guys were right. After changing windows, adding decent insulation between the loft and rooms below and changing 16yo combi onto the newest generation one (+tado controller) – we got a realistic, triple-checked 40% reduction in bills. Nearly half price, with exactly the same heating preferences. Splendid insulation guys – that’s the key.
Hi the article is great but I have a number of points to make regarding it.
It is a bad idea to abuse the Ombudsman system by making complaints without merit as this will hurt other customers who need to make valid complaints.
I have also been told that the Energy Ombudsman doesn’t charge energy companies for vexatious complaints. Many people are determined to make those complaints so that the energy companies can pay the Ombudsman to investigate.
I know this a debt website and the article is very good good but the problem with Don’t Pay as that they will bankrupt the energy companies if enough people take part and create extra problems.
Also it is not very likely that one million people will take part.
Despite all the issues this is the only place where I could get proper information.
It is a bad idea to abuse the Ombudsman system by making complaints without merit as this will hurt other customers who need to make valid complaints. I never suggested this. I pointed out that I don’t think saying you cannot afford the ongoing bills as the prices are too high would be seen as a valid reason to complain.
I have also been told that the Energy Ombudsman doesn’t charge energy companies for vexatious complaints. The Financial Ombudsman definitely has this clause. I would expect that the Energy Ombudsman does too.
they will bankrupt the energy companies if enough people take part and create extra problems. Well possibly, but I am more interested in the problems for people being asked to pay unaffordable amounts for their energy.
Also it is not very likely that one million people will take part. You can’t really argue both that it may bankrupt energy companies and also not that many people will take part…
But we will see how it goes. My hope is that the government will step in with adequate assistence not just for people on benefits but for the many people on ok but not high incomes who have no chance of affording these high bills.
You sound like you work for the energy companys, go bankrupt ,my arse, don’t pay is a choice if we all sit waiting for others to do something nothing happens ,mobilise you have the “power”
The key message here is cancel the Direct Debit and ask for a bill of energy consumed. HOWEVER, the rate of charge will increase as there is a discounted rate for DDs (which is to be detriment of low earners/unemployed, etc.).
I believe the solution is to agree to a DD of, say, £100 per month and ask for a bill and then promptly pay the amount owed (for energy consumed). That way you are not in default but paying for what has been used – and gaining the DD discount.
it may be your supplier will not agree to a DD like that. Although I have heard reports that some people have got this agreed.
This article misses an important point – this rip-off will impact the elderly and disabled more than anyone. If you are elderly and/or disabled, ESPECIALLY if you rely on power for essential medical equipment you MUST make sure your energy supplier knows this. They cannot, by law, disconnect your supply. I’d also like to add that for lots of folks, wether they have a poor “credit rating” or not is immaterial, they’re not considering not paying out of pure pique! They simply cannot pay. Has anyone actually TRIED to get through to Citizens advice lately?? Or Age Uk for that matter.. I wish people writing this advice were a little more firmly rooted in the Real World..
I wonder what your thoughts on cancelling my DD and just ringing them up every month and paying the balance? Because as far as i understand it, my Dds are worked out on previous usage and i simply wont be using as much energy this winter. I think im pretty much square with whats owed.
Yes, you can do this. It won’t harm your credit record as you are not getting into arrears. And they can’t make you have a prepayment meter fitted as you are not in arrears.
However, the problem with paying for the usage every month is that your peak usage will be in January-March, which is right when the next set of price rises will hit.
The price cap is predicted to go to £5387 then which would be a DD of about £450 a month for the “average” household. But if that average household pays on the monthly bill” then their January bill could easily be £700. Those won’t be the same numbers for you, but the same principle applies…
So even if you can take 20% off your energy usage (and most people will find that very hard) you may be hit with huge bills in Jan-Mar. Direct debits are intended to smooth the winter “hump” over the whole year.
One possibility is for you to start taking regular weekly readings from now – take pictures of these. This is called a “burn test” – it shows what you are using in detail. You may then be able to argue to your supplier that the DD they are asking for is too high as you have proof that you have reduced your usage.
With regards to Direct Debit Cancellation and the loss of discount having a DD setup affords, note that not all energy companies give such a discount.
You should check with your energy company regarding this as switching then to standing order will not have any negative effect on your bills.
Finally, some energy companies will allow you to move on to Variable Direct Debit, this is in effect the same as a Standing Order as it takes payment of the bill in total for that particular period.
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