‘I think my energy direct debit is too high – what can I do?’

Summer is winding down and soon households will be reaching for the thermostat and cranking up the heating. 

Though their energy usage may rise, most will not see their monthly payments change, as they pay a fixed amount to their provider every month.

More than half of the households pay for their energy use by direct debit – at a rate decided by their provider. The direct debit system is intended to smooth out costs over the year, meaning households pay a consistent rate even as their energy use fluctuates between seasons. 

But, after wholesale gas prices shot up in response to the war in Ukraine, bill payers have become increasingly frustrated by how their direct debits are decided – prompting some who believe they are being overcharged to cancel them entirely.

If you believe your direct debit is being set too high, you have a number of options available to alter it. Here, Telegraph Money outlines everything you need to know about the direct debit system, and what your rights are.

Why should I pay energy bills via direct debit, and how is it calculated?

Direct debit payments are protected under the direct debit guarantee, which covers all payments and is overseen by Pay UK, the regulator. 

This means if there is any alteration to the amount or frequency of your payment your supplier must inform you 10 working days before taking a payment. 

Direct debits can therefore be a safer way to pay than the alternatives. But households have previously taken issue with how much their provider charges them.

Your supplier decides the amount it charges you per month based on your estimated annual usage. 

This is calculated from the amount of energy you used the year before, and adjusted for any price changes – of which there were several last year owing to turmoil in the wholesale market. 

To ensure this is accurate, it is recommended households submit regular meter readings – although this is unnecessary if you have a smart meter, which does this automatically. 

Energy regulator Ofgem says: “If your bills are estimated, check the estimate against your meter and if they are different, contact your supplier to give them an actual reading.”

Naturally, your usage will be higher in the winter months than in the summer, so fixed direct debits allow for easier budgeting by smoothing out the payments over the year. 

This means you will overpay for your energy in the summer, building up credit with your supplier that will then be used in the winter.

How much should I be paying?

Below is a graph showing a typical household’s energy consumption in a year, according to data from the supplier Octopus Energy. 

It is recommended your credit balance is at its highest in November, as this is when household heating use starts to reach its peak. Balances should be at their lowest level by the end of April, by which point the credit built up during the previous summer should have been spent.

For example, a typical household paying £150 towards energy each month should expect to have a balance of just under £500 by the start of November, according to Octopus Energy.

A “balance forecaster” created by the firm allows its customers to see how their credit balance changes over time and offers recommendations to bill payers as to whether their monthly payments are too high or too low. 

The tool, currently in beta, also allows customers to set their direct debit to a level of their choosing, but for other providers, the process can be more laborious.

Can my provider change my direct debit – and can I ask them to lower it?

As outlined above, your provider can alter your direct debit so long as they give you 10 days’ notice. If you do not understand why your direct debit has increased, it is recommended you contact your provider directly and ask. 

If your supplier is unable to answer your questions, or you are unhappy with the outcome, you can make a complaint to them. If you’re unable to get this resolved, you can go to the Energy Ombudsman.

Direct debits are typically reviewed twice a year. If you are in debt to your supplier at the end of a payment year, your supplier may take the money from your account as a lump sum, or spread the payment you owe over the following year. 

Your supplier is obligated to take into account your ability to pay when chasing any debt that you owe.

I am in credit to my supplier – can I ask for the money back?

In short, yes. Your supplier must refund credit when you ask for it, unless there are reasonable grounds for withholding the money. 

A sensible time to recoup any extra credit is before the summer when your energy bills will be at their lowest and you will not need as much credit balance. Renters will also want to reclaim credit at the end of a tenancy.

What are my other options?

There are two other options for households frustrated by the fixed direct debit system. 

The first is pay-as-you-go – this typically uses a pre-payment meter, although smart meters can also be set to prepay mode. This method involves “topping” up your meter periodically, but when the meter runs out of credit you will be disconnected from your power supply. 

Prior to intervention from the regulator, Ofgem, prepayment customers (including those paying by cash, cheque or bank transfer) were billed at a higher rate than those paying by direct debit, as providers offered discounts to the latter. 

But in July of this year, the Government scrapped the “unfair charge”.

Alternatively, households can pay by monthly variable direct debit. This means you will be automatically billed for your actual monthly usage, and therefore your bills will be much higher in the winter than in the summer. 

While this will cause your monthly payments to fluctuate throughout the year, you will at no point be in credit with your supplier.