A MAJOR energy firm has revealed exactly how it works out your direct debit each month.
It comes as plenty of households fear they’re being overcharged as prices rocket, and they just don’t have the cash to spare.
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Even Martin Lewis has stepped in to urge bill-payers to check their own payments, as a third of his own fans claim they’ve been charged double what they were expecting.
Octopus Energy has tried to put its customers’ minds at ease though, as it explained the exact breakdown of how direct debits are worked out.
The energy giant said that, if anything, “customers owe us more money than we owe them.”
The energy giant claimed that by the end of this winter, the average customer actually OWED £214.
That’s actually because the real amount you pay for energy via direct debit is “smoothed” out over a year.
Overall, of course, you pay the same amount each month, even when your energy usage changes.
But you generally use more gas and electric in winter and less in summer.
So plenty of customers find themselves in credit once the weather outside starts warming up, but they might be in debt, forking out more, once it turns.
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Those coming off fixes had said they’d seen their direct debits rise the most.
Plenty will have been able to dodge the recent rises if they were still under their fixed contract, but now those have ended the next best thing is moving to the price cap – even though it’s MORE expensive.
Bills are only expected to go up later on in the year too as a further increase to the price cap could mean energy bills rise ANOTHER £600.
That means they could soar to a whopping £2,800 by the end of 2022.
And with so much turmoil in the industry, a number of suppliers have collapsed – more than 30 having gone bust in the past year alone.
But when an energy supplier collapses, regulator Ofgem automatically assigns customers to a new provider.
As a result, many households who were appointed to a new company have seen their bills go up, because the new supplier does not have to honour the deal they were on.
Why might my Direct Debit change?
Octopus explained that you might see your direct debit change because:
- Your tariff has changed
- Or your energy consumption has changed
If the rates and charges of your energy go up, your annual energy cost will too – like with the price cap, or rocketing wholesale prices.
Your energy consumption might change if you suddenly start using more power too and that means more pennies added onto your bill.
You might have an extra body in the house, or new appliances that are causing the costs to tot up more than your supplier had estimated initially.
How are direct debits worked out?
Octopus explained that it takes the unit rate of the energy tariff you have, and multiplies it by how much energy you are “expected” to use over a year.
It’ll get that little bit of info from your energy meter.
Your energy meter should document exactly how much you use, and then your daily standing charge is added on top.
Whatever that comes to is divided by 12 to get your monthly bill – or base amount.
How to check it’s right
Check your usage against what you’re being charged to make sure you’re not forking out more than you should be for energy.
You can take regular meter readings online, to make sure you’re up to date.
It very well could go up though.
If you’re coming off a cheap fix and rolling on to a standard tariff, you could be paying double thanks to the recent price cap rise.
So if you see a similar increase to your payment, it’s not necessarily cause for concern.
Challenge it if it’s not right
If you pay by direct debit, then this monthly amount should be “fair and reasonable”.
But if you check it and you don’t think that’s the case, you can complain to your energy provider.
Your supplier must clearly explain why it’s chosen that amount for your direct debit.
If you’re not happy with the outcome you can take it to the independent Energy Ombudsman to dispute.
But you should also take regular meter readings to backup your claims.
Not only will that allow you to track your own usage and check when you do start paying more, but it means the company you’re with can’t rely on estimates, which may lead to you being overcharged.
A reading leaves no room for error either, as it shows precisely what you actually used.
If it’s lower than your estimate, you can ask your provider to lower your monthly direct debit to a more suitable amount.
But beware that you don’t end up in debt later on with a bigger catch up bill at the end of the year from underpayments racking up.
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