Annual energy bills are predicted to surpass £4,200 come January – a startling number that many Britons will struggle to comprehend, let alone pay, given household budgets are already being stretched to the limit by soaring food and fuel prices.
This looming hardship has fuelled support for the Don’t Pay UK campaign, which says more than 100,000 people have pledged to join its mass protest and stop paying their energy bills from October. However, charities have issued warnings about the risks associated with doing this. So what are your options to manage skyrocketing energy bills this winter?
There is not necessarily safety in numbers, and joining the Don’t Pay UK boycott is a high-risk strategy. Gas and electricity demands are classed as priority bills, says the debt charity Stepchange, meaning there can be severe consequences for missing or being late on a payment. The supplier can chase arrears using a debt collection agency or seek a court warrant to enter your home and fit a prepayment card meter, which cuts off the electricity if it is not topped up and comes with a higher tariff.
Adam Hosker, a director of the mortgage broker Cyborg Finance, says anyone refusing to pay is “swinging a wrecking ball at their credit score”, with the resulting black mark making it harder to secure a mortgage or loan in the future.
Your supplier should explain how your payment has been worked out. Some suppliers have got into trouble for raising customers’ direct debit payments by too much – so check the maths and don’t be afraid to haggle if you think it’s wrong.
Ofgem, the energy regulator for England, Scotland and Wales, recently conducted a market review to ensure customers were being treated fairly and has threatened to take action against firms with poor customer service.
If you pay via monthly direct debit, your energy firm will have estimated your annual usage and spread the cost over 12 months. This means you’ll probably be in credit during the summer, with that cash helping to pay for the colder winter months when your usage is higher. If you are an existing customer your payments should be based on previous consumption levels and you should be given at least 10 days’ notice of any increase.
Some companies allow you to manage your direct debit size and, in the face of rising living costs, reducing your monthly payment is one way to improve your cashflow. But doing this is not going to lower your overall energy costs. It just means you’re paying less towards them each month, and you could receive a big catchup bill later in the year.
If you are concerned about your billing, take it up with your supplier, and if you can’t resolve the issue, complain to the energy ombudsman. Energy companies then have eight weeks to resolve a formal complaint.
This is an idea aired by the food writer poverty campaigner Jack Monroe, with the caveat that consumers should “check the T&Cs [terms and conditions] of your agreement first” as some cheap contracts are only valid if you pay by direct debit.
James Andrews, a senior personal finance expert at the price comparison website Money, says: “Standing orders are predictable. You set an amount and it will stay the same until you choose to update or cancel it. This can be a good way to budget. However, if your bills increase this may result in you going into debt with your energy supplier.
“Direct debits change based on what you owe. However, it may mean you pay out more than you budgeted for, leaving you with less money in your account for all your other expenses.”
Another alternative is to pay for your energy costs upon the receipt of a bill every three months, but doing it this way will cost more than if you paid by direct debit.
Contact your supplier first – Ofgem rules mean they must offer a payment plan you can afford. Some big energy firms have hardship funds that may give you a grant to help with the debt. Citizens Advice has a list of these and how to apply.
If you have a prepayment meter, you can ask your supplier for “emergency credit”. You might also be eligible for an emergency fuel voucher from the Fuel Bank Foundation. The £49 voucher (£30 in summer months) is accessed via a referral from one of the charity’s 250 partners, which include food banks and Citizens Advice branches.
The government’s energy bills support scheme, which applies to consumers in England, Scotland and Wales, can be accessed from the autumn. All households with a domestic electricity connection will receive a £400 discount on their bill, paid in six monthly instalments, from October.
There is other support too, including the £650 cost of living payments for those on income-related benefits and tax credits. Pensioners who receive the winter fuel payment will also get a one-off £300 payment, and there is an extra £150 for about 6 million people who claim certain disability payments.