Energy bill increases: how to beat unfair energy direct debit hikes

Is your direct debit higher than you think it should be? Some customers have noticed their direct debits payments have increased by more than expected. 

In July Ofgem told a number of energy suppliers to take immediate and urgent action, after its review found a range of problems in the way customers direct debits were being charged.

Jonathan Brearley, Ofgem CEO, said: “We know how hard it is for energy customers at the moment so it’s crucial that the amount they pay each month in direct debits is right so they can manage their money.

"Suppliers must do all they can, especially during the current gas crisis, to support customers and to recognise the significant worry and concern increased direct debits can cause.

Since then, things have not got better resulting in Business Secretary Grant Shapps writing a letter to energy suppliers, asking them to bill a reflection of energy usage and not overestimates.

Ofgem has said that customer direct debits can vary depending on a range of factors, and that some of these, such as recent tariff changes, high debit balances or recent meter reads, can drive large adjustments to your direct debits amount 

But it says energy suppliers should ensure your direct debit is set correctly based on all relevant information available, and that it communicates any changes in a way that helps you understand your payments for energy.

If you think you're being charged unfairly, here’s everything you need to know if you pay your energy bill by direct debit.

Can a company change my direct debit?

A company is able to change the amount, frequency or date of your direct debit but it must notify you in advance of any money being debited from your account. This is normally 10 working days to a month before the change. 

Energy companies do this frequently as bills are usually given as an estimate of the amount of gas and electricity you’ll use in a year.

If you use more or less than the estimate, your monthly payment will be altered to reflect that depending on the tariff you are on.

But with the increased energy price cap now in force, those on their provider’s standard variable tariffs can expect their gas and electricity bills to rise by 54%. If your new payments are much higher than this, then you should challenge it.  

“If anyone thinks their direct debit has been increased to an unreasonable amount, they should contact their supplier as soon as possible to request this is reviewed,” says Richard Neudegg, director of regulation at Uswitch.

The Times (opens in new tab) reported households on a fixed tariff have also seen a hike in direct debit payments, despite the fact that they are trying to reduce energy consumption. 

Business Secretary Grant Shapps is concerned about reports showing household energy bills were continuing to rise even though people are cutting back on energy. 

He has taken action and written a letter to energy suppliers, requesting them to not over-estimate charges, but for energy bills to reflect what people are using. 

In the letter, the Business Secretary told energy firms: "I am interested to understand how you intend to ensure that your direct debit system does not over-estimate charging.

"I am very keen that all suppliers find a way to make their systems more responsive to these positive changes in consumer behaviour," he adds.

Ofgem (opens in new tab) has looked into this issue before and found around 500,000 households saw energy payments double. Ofgem is not afraid to take further action if necessary. 

But, Energy UK (opens in new tab) has told the BBC (opens in new tab) rising direct debits were always going to happen in order to reflect the hike in energy prices from this time last year, which has almost doubled. 

The rise in direct debit hikes is also causing confusion amongst people.

What can I do if I don't agree with my direct debit increase?

Remember that as well as changing to reflect the higher price cap, energy bills can also change because you are originally billed for the amount the supplier thinks you will use - and if you consistently use more, the amount may go up. 

However, if you think your energy provider has increased your payments disproportionately or that a mistake has been made, you can challenge it.

Martyn James of the complaints website Resolver said many people are currently complaining about “being billed huge amounts for their energy consumption, often after a supplier switch” and that it was “clear from many of the complaints that there’s obviously a problem as the consumption isn’t realistic or feasible.”

Contact your energy supplier’s customer service department. Request that they show you how they reached the direct debit figure by providing you with the meter readings and calculations that they have used.

“Go through your bills and check when the meter was last read properly,” says James. “See if you have records of your readings and when you gave them too. 

“It makes sense to take photos of your meter whenever you read it so you have a back up – and to give a reading to the energy firm whenever you can,” he adds.

How to dispute a direct debit payment if you think a mistake has been made

If you have received a new estimate from your energy supplier which you believe is unreasonably high - perhaps you are always in credit, it is summer or it is much higher than the rise in the price cap - politely request that the direct debit be lowered. 

Ask that your bill better reflects your actual usage based on your meter readings. It might be easier to do this if your balance is zero, so pay off any money that you owe your supplier first. 

If all else fails, you can make a formal complaint in writing to the business stating it is breaking the Retail Energy Code, and ask that it lowers your direct debit payments or you will leave.

“If they don’t sort things out, you could go to the ombudsman. Your energy provider may ask you to do daily meter readings for seven days to see if there’s a problem. But ultimately, if the readings make no sense, it’s up to the energy firm to sort out the problem. This can involve sending out engineers to assess the meter’s performance or even a forensic analysis of your bills,” says James.

Is direct debit a good way to pay?

Direct debit is a safe and simple way to pay. It means your bills are paid on time and you will avoid the risk of late payment charges. And if you pay by direct debit, then you could save around 7% on your bills as energy companies prefer it if customers pay this way.

But in some cases, households tend to get overcharged because energy companies look at previous energy consumption, and whatever excessive energy is used over winter, its cost is spread throughout the year. 

So it is a good idea to check them regularly to ensure the payments are accurate - and in the case of energy companies, check they are fair.