Utility bills - why do we have to pay so much in advance?

[strangeandfamiliar]

Just a rant really - as usual consumers are powerless about this sort of thing. I've just had a look at my Ovo account for combined gas and electricity. I have to pay £285 a month and as usual am hundreds of pounds in credit. Last month (as always in the summer) the actual bill was about £70, most of which was standing charges. At one point a couple of years ago I was about £1200 in credit and had to submit a complaint to get some of it refunded as they initially refused. I have no idea why utility companies are allowed to operate in this way. We have never been in arrears, own the house, have been here a decade, and have no trouble paying other bills, which we only have to pay when they are due and for the amount actually used/owed- such as mortgage, council tax, mobile phones etc. I'm fortunate in that for us the DD is easily affordable - but if I was struggling or on a limited budget it would be really detrimental for such large sums to be taken in advance and just be sitting there in Ovo's coffers 'in case' of large winter bills. I can manage my own money, thank you very much. How has this become the norm? (I know I could contact them to try to get my DD lowered and get some of the credit refunded, but why on earth should I have to do all that?)

That sounds like an awful lot! I think I might consider switching suppliers in those circumstances - unless you're on a very good deal. Octopus and Eon don't ask for that much upfront and you'd probably get £50 to switch too. Plus you'd get your credit balance paid back to you?

You can just pay on receipt of bill or variable direct debit instead (the latter means you retain the DD bonus).

As to why, unfortunately a lot of people can't manage their money and don't plan for much winter bills during an expensive time anyway with Christmas. But if that's not you then just change your payment method.

If you're with Octopus you can set your own DD amount in the first place.

Well the obvious reason is because most people prefer it this way. To prefer a set amount every month, then they can build a budget around that amount, rather than pay £60 a month in the summer and then in the winter months have to find £350 a month.

I'd be wary of Eon - they've done the same thing to me. I've got almost £500 worth of credit and they've just increased my dd anyway because winter is coming and the energy cap is rising. I'd rather they used some of my credit up first. But apparently I'm not eligible for a refund and am only allowed to reduce my dd by 10%. I wouldn't mind so much if I was ever dipping into the red at the end of winter, but I'm not. I'm always between £200 and £500 in credit.

totally agree @strangeandfamiliar

Although, I know financially I'm £8 p.m. worse off over the year, I do not have a direct debit mandate with my energy suppliers.

Just submit reading and pay each month.

I really do not want them having the ability to hi-jack my bank account at their convenience.

Thanks all - and yes, after I'd posted I realised that for many people it might be helpful with budgeting. But it means privatised utility companies essentially have a 'risk-free' business model, placing the onus on us as consumers to pay in advance rather than being paid for actual services rendered. (It can't be argued that it helps to keep costs down...!)

@strangeandfamiliar I agree it’s ridiculous

EON used to owe me about £300 a year every year and refuse to reduce the direct debit

I did get it back as soon as I asked but it was the refusal to lower the DD that pissed me off

I had the DD because of a discount that wasn’t applied if you pay on receipt of a bill

I have since moved to a new flat and now stick with paying on receipt but British Gas want a DD that’s crazy high and the discount isn’t worth it.

to complicate matters, everyone seems to have a different experience. Which in turn makes me wonder what the rules actually are. It’s mad they are allowed to operate this way.

both my current and previous places were big blocks of flats so there was always a neighbour to compare with and we were all just baffled by how these companies operate billing.

Bulb/Octopus have always allowed you to set your own monthly payment, and you can do refunds on-line very easily.

I think most people do like to carry a credit into winter to not get caught out by a large bill. Your £1,200 credit may well disappear over the Winter.

Remember that Utility companies have gone bust, Bulb, and that for every credit they have they also have many people in arrears, and are obliged to give help and credits to those in difficulty.

It's bonkers. I know you can opt out of DD but you have to really dig for the info as it's not routinely offered as an option. I'm old enough to remember paying utility bills before privatisation. Everyone in the area had the same provider, quarterly bill, paid for what you'd used, no problem. Demonstrates the uselessness of 'choice', when all most of us want is for things to work and not to have to constantly think about whether or not we're being ripped off or getting the best 'deal' on basics like heat and light.

I pay each month for what I use. I either submit readings or they do estimated ones, based on usage from the year before. My brother was caught in a cycle of expensive d.d, and always in credit. He was owed nearly a thousand pounds, he fought for 2 years to get it refunded. It was a nightmare. Energy companies, shouldn't have that much power over people.

And yep, my credit may well disappear over winter, but in the meantime I could have had it in a high interest savings account or used it to buy shoes and food for the dc...rather than it sitting in Ovo's bank account.

I get that these companies do carry some risks for non-payers - but as they're privatised, why should that risk be transferred to me?

I prefer to keep my energy account in a credit. If I have it in savings I risk being penalised by universal credit. I'm always going to use energy so it's better off with the energy company.

You can opt out of it. I disagree that you have to dig so much for it. I agree that most companies don't present it as an option that's easily switched to via their website, and I think they should, but surely it's not some big hidden secret? I was on variable DD within a few months of becoming responsible for the bills -(the first few months I set a low DD and paid the excess by card, but after a few months they demanded to raise it. I then demanded the switch to variable direct debit.)

The answer is that you don't have to pay so much in advance. I would advise that you even shouldn't. If you switch away from estimated annual payment/12, you will never have to contact them to refund credit or lower DD again.

You don't have to pay a set amount on a monthly basis. I pay for my usage each month. This means that I'm never in credit or debit, but it also means that whilst I'm paying an average of £70 per month through the summer, I might be paying around £280 in winter.

That works for me, but some people prefer a consistent amount.

SSE (now Ovo) were such greedy bastards to my vulnerable mum, so that she ended up with a couple of thousand in credit before she died, that I too don't let them get their greedy paws on my bank account even though they keep trying to get me to do the fixed payment thing with promises of cheaper energy if I do.

I'm the same as pp - submit meter readings at each month end then pay for the amount actually used by variable dd.

Really low bills in summer, but you have to budget for higher winter bills (although the highest bill I've ever had was less than £200 total for both)

I'd rather my money worked for me in my account than theirs!

@Precipice is this a customer right? I had the same argument with eon every year. They were adamant that the DD could not be reduced below a certain level.
the alternative offered was to pay on receipt and not get a discount for DD.

Maybe I didn’t look into my rights enough but they should have to make that option clear if it is correct?

even now, British Gas have told loads of people in my block that the minimum DD is x amount so we mostly pay on receipt of a bill as it’s a new build and no one is going to use the amount they say.

If I reckon my DD is too expensive, I just go online to reduce it. I have also done that for my FiL too, I reduced his to less than half.

I take it you're not with Ovo? Reducing the DD amount isn't an option - I just checked. The 'minimum amount' permitted is the amount I'm already paying. They'll very kindly let me increase it so they get even more of my money in advance every month. How they worked that out I'll never know.

But thanks all - glad I posted. I'm going to look at changing to payment on receipt of bill if it's as easy as pp say.

Just be careful @strangeandfamiliar because you might get a discount for paying by DD. It might be worth trying to find a provider who allows variable DDs, then you send your monthly readings and pay for what you use each month.

Thanks - good point. I also want to avoid being strong-armed into having a smart meter fitted, given that those haven't exactly been a resounding success so far. But that's a whole other story.

Those customer credits must total millions of pounds - invested to make energy companies even more profit. Whilst low income families and the elderly have to face a miserable winter.

Massive windfall tax now!

I am on a variable DD with Octopus (grandfathered from Shell so I don't know how you would set it up with them.) I send a meter reading every month and get an accurate bill which is taken by DD 2 weeks after it's issued so I'm in debt for half the month and never in credit at all. And I still get the DD discount.