To switch to "pay for only what you use"?

[lancsgirl85]

Apologies for posting in AIBU. Happy for it to be moved to a more appropriate section.

I contacted my energy company on FB after days of not being able to get through on the phone to speak directly with someone. I wanted to get a rough estimate of my bill for October.

They replied that they can't give exact figures right now and they would update in the next few weeks, but they advised to expect an 80% increase. We pay £269 pm already so we are looking at £480 ish pm. We can't afford this.

I replied to this effect and asked what options they could offer us?

They listed a few, the first of which was: "you can change your direct debit to pay for only what you use rather than spreading the cost over 12 months".

This confused me. Why am I not already just paying for what I use? Why would I pay for what I haven't used?

Looking at my last statement we used £155 worth of gas and electricity combined and paid £269. So we should be in credit, right? Therefore can afford to pay less in theory?

Sorry if this is a really stupid question but the whole thing has just really confused me!!

You already do pay for what you use, only you spread it out over the year. Surely paying £269 a month is easier to manage than paying £150 per month in summer and £750 some months in winter.

You could pay less yes, but bare in mind the prices are rocketing from 1st October so that credit won't last long.

The whole point is to build credit in the summer months to cushion the blow in the winter months.

By keeping payments the same over 12 months, you don't pay tiny bills in summer then get shocked by enormous bills in winter.

They want you to pay an average amount of your annual usage basically.

That's how people end up with huge credits on accounts

Martin Lewis has just said that paying quarterly (when you recieve the bill) is the most expensive option, so try asking your company if you can reduce your monthy direct debit

You use a lot more energy in the dark and cold winter months, so by overpaying in the summer months, you're building up a cushion of credit to ease you through the winter.
You can switch to paying bills in the traditional way (not direct debit), ie get sent a bill for the last month / three months and pay it - but your winter bills will be much higher than your summer ones.

Yes as has been said, by paying a set amount a month via direct debit you know exactly what you'll be paying and the idea is that you aren't hit with humongous bills over winter whilst in summer don't pay much- it spreads it out. You do actually only pay the company what you use though, you just have credit on your account for future bills if there's a mismatch, you can also go into debt as well so it's worth keeping an eye on either way.

Ok, makes sense, thank you.

I'm struggling to understand my bill, can anyone help me make sense of this?

On 12th August my account was £19.95 DR.

I was billed on 13th Aug for the period 13th July-12th Aug, showing a usage of £151 in total.

My DD of £269 was collected on 1st Sept but account is still showing as £19.95 DR and a note saying that payment collected on 1st Sept is still pending and has not yet been applied to my account.

Am I right in thinking that when this payment is applied, I will have £269 minus my usage of £151 and the outstanding balance of £19.95, which will leave a credit of about £98 on my account?? Or have I worked this out wrong?!

How we used to do it here in Australia (before I got my smart meter and do pay for what I use) was that you would pay a DD through the year based on your previous usage plus a bit so your payments would be the same, so you didn’t get a nasty shock.

But the good bit was in January you would get a bill saying “well done, you overpaid (underused) by X amount so your next bill is nothing (or a really tiny amount). It was quite cool.

Now I have a smart meter I get a bill every 3 months but I also get a “you’re up to this much, your bill is likely to be THIS much” throughout the 3 month period. I put $100 into savings each week which covers the bill every 3 months and in winter it builds up (as ours is higher in summer because of air con).

@Ozgirl75

We also have smart meters, if that makes any difference

@lancsgirl85 that sounds right to me.

Thank you.

I think the idea behind the DD was that, say they think you’ll use £2000 over the year, but your use is way higher in December and January. It stops you getting a nasty shock in those months and also allows the credit you build up over the summer months to balance it out over the higher use months.

The problem as I understand it is that companies have said “well the unit price is going up, so now, to keep you in credit, you need to pay a much higher DD”
If you’re confident that you can pay the bill every month, even allowing for higher ones in winter, then you can do away with the DD and just get a monthly bill for your use and pay that.

I pay monthly by variable dd for what I've actually used the previous month.
So this month I'm paying Gas 15 and Electric 57.

Obviously I'm aware that the costs will escalate in colder months so I have a spreadsheet on which I project a budget for the whole year. ATM I'm projecting 300 for each winter month, and paying monthly I can see whether I need to cut use age further or increase projected costs.

But bear in mind that we have a large savings pot of nearly 30k, so while I don't want to eat into that, it is a massive safety net which not many people have.

That looks right. Then you'll get another bill on 12th September that is likely to be a similar amount to the August bill and you're likely to go more into credit by the time you make your early October payment.

However, if you're on the price cap, your bill for October will increase by 80% so go up to about £270, so only just covered by your direct debit amount plus, as you go further into winter, you'll likely use more heat and light, so your bills could go up quite a lot more (another rise is expected in January).

Your monthly bills for December to February could easily be £4/5/600 and you could come out of winter with a debt on your account, even if you go £2/300 in credit in the next few weeks.

You will get a £66 pm bill credit from October to March, which could increase depending on what is announced by the new PM in the next few days, but unfortunately, your £269 DD is probably in the right ball park, and if you switch to variable monthly DD, you'll have large winter bills to pay.

I predict a lot of complaints/threads about this early next year when people get winter bills for hundreds of pounds for a month that are for winter usage plus the April, October and January price increases, which on their own make up a price increase of three to four fold from the same time early this year, maybe more if someone came off a cheap fix.

I'm not sure what to do now tbh.

I asked them to change it when I messaged them on FB, but I'm now wondering if that was the right decision.

I just can't believe we are looking at almost £500 for our DD next month, it's insane 😞

Yep, this is when you should be in credit because from next month your bills will start to rise. The trouble with the 'pay what you use' brigade on social media is that they fail to realise that means Jan bill will be upwards of £600. Fine if you have the cash flow to do that but most people prefer a smaller set amount monthly for budgeting reasons, rather than a small amount one month and then a huge amount the next.

You will always pay what you use. There's no hack to avoid that. You're just looking at different methods for spending the same money.

My Jan bill is going to be £900 based on previous usage. No way I want to be paying all that in one go!

If you have a smart meter, you don't have to put up with any of this 'predicted usage' rubbish.

The whole point of a smart meter is that you know what you use, and they know what you use.

I have switched from a direct debit to requesting an actual bill every month. They had tried to increase my direct debit to £90 per month. My actual bill for last month was £47.

Just take control of it and stay on top of it each month. £500 per month is insane. Do you live in a mansion?

Cancel DD through your bank.

That ! Maybe I'm lucky with my company , but we haven't built up huge amounts of credit with them, because they adjust the DD amounts down when we do get a lot of credit with them.

@BarbaraofSeville

When she said expect and 80% increase, I thought that meant whatever we are paying by DD now (ie £269) will be increased by 80%, taking it to £480. Which made me want to cry.

But I'm now wondering if I have I misunderstood this based on your post.

Do I actually need to take my usage amount and multiply that by 80.% instead? Therefore £150 ish (I accept higher in winter) multiplied by 80% gives closer to £270, which is what we already pay. So I don't need to panic as much as I thought I did?

Do you reckon if we allow about another £100 pm to cover winter; therefore DD set at around £400, we might be OK? We can afford to increase by another £100, but not £200!!

You could look at what you can do to reduce usage. Hopefully October won't be much colder than September so you can hold off using the heating but a bill for £151 in the summer sounds like quite a lot - ours was about £90 and we're currently on a fix that's about 15% above the April 22 price cap, I WFH and we're probably not as careful as we could be with turning lights off and our fridge freezer is 25 years old so nowhere near as efficient as a newer one - we're currently running down the contents and considering replacing it fairly soon.

@GreenFingersWouldBeHandy

It's not a mansion, I wish 😂

It's a 3 bed detached with high ceilings and large rooms though (Victorian style), therefore takes a lot to heat. But we have hardly had the heating on at all over recent months. I think it's been on maybe once for a couple hours to dry some clothes. So that usage of £150 is with the heating virtually off for the entire month.

I do have a teenager who likes to take 30/40 min showers, though! That will be stopping sharpish!!

Plus likely your December and February bills will be similar, especially if you cook a big family Christmas dinner and are home a lot over the holiday period, February is after another expected price rise and often the coldest month of the year, so potentially 3 big bills in a row, often when people have also spent a lot of money at Christmas.

OP, there's too many variables to predict what your DD should be, but as I said in my previous post, £151 in summer is a lot, so you might want to look at what is making up this and whether you can cut down to cushion the winter blow.