Is my energy supplier allowed to increase my direct debits?

Energy regulator Ofgem has announced plans to better protect direct debit customers and those with credit from their supplier.

It follows that some suppliers are increasing direct debits to raise capital as millions of households have had to foot the bill for the collapse of 30 energy suppliers due to soaring wholesale gas prices.

In this article, we will cover:

Energy regulator Ofgem set to crack down on companies that overcharge direct debits under new proposals

What are the rules right now?

Under current rules, when a company goes bankrupt, its customers are transferred to another supplier chosen by Ofgem. However, this new supplier will not obtain the credit balances of the failing supplier’s customers, so the costs of replacing these balances are shared among all customer invoices.

The new plans, which have yet to be finalized through consultation, would mean energy companies would have to protect their customers’ money in the event of bankruptcy and transfer funds from accounts payable to the replacement supplier.

Ofgem said it hoped the measures would put an end to “risky behavior” by energy companies.

How will the changes affect me?

Around 30 energy companies have gone out of business in the UK since August last year, including Bulb which had 1.7 million customers.

As part of a crackdown, Ofgem says it will tighten rules on the level of direct debits providers can charge to “ensure that credit balances do not become excessive”.

Ofgem has also accused some companies of using customers’ accumulated credit as an “interest-free corporate credit card”.

He said new measures are coming to protect credit balances as suppliers go into administration.

The cost of moving customers to new suppliers since September 2021, including purchasing additional short-term gas when prices were at record highs, as well as replacing lost customer credit balances and levy payments greens, was £94 per household, according to the regulator.

The new measures mean that money from other customers will not be used to cover these balances.

Read more: How to control your energy bills in the face of the spiraling cost of living crisis

Is my energy supplier allowed to increase my direct debits?

If you’re on a standard variable tariff, your supplier is legally allowed to raise it up to the ceiling price level – so that’s 54% more than what you paid before it came into effect on April 1.

You should be informed in advance if your payments increase, this should also include a detailed explanation of the reasons.

If you think your direct debit fees are too high or unaffordable, contact your provider as soon as possible to avoid going into debt or paying too much.

Of course, any accumulated credit balance can be refunded at your request. They are not allowed to withhold your money just because they can.

In normal times, it’s usually a good idea to get that money back before the summer, but given the rising prices, it might be worth keeping the balance.

Any extra money can act as a buffer against future price increases.

So they can raise my bill by the full cap?

Yes, but providers will assess direct debits based on your credit balance (i.e. if you have accumulated lots, your direct debit may be lower) and also usage (i.e. tell if you used more or less than expected).

So the price cap change doesn’t translate perfectly to your direct debit level.

It also depends on whether you are on a fixed rate or a standard variable rate (SVT). It is the SVTs that are affected by the cap, so these are the bills we are talking about here.

Find out more: All the help you can claim during the cost of living crisis

I am on a flat rate, why has my direct debit increased?

A fixed rate means that your unit rates and standard charges will not change for the duration of your contract, but your payments may change if your usage increases or is not within the estimates provided at the time of your change.

Indeed, your payments are based on an estimate of the amount of energy you will use over a year.

You will not be affected by the cap if your usage has not changed dramatically, if you are on a fixed tariff or on a standard variable green tariff which Ofgem has not included in the cap.

But mistakes do happen and we’ve heard of customers whose bills have gone up despite a fixed deal.

This can be due to a variety of reasons, ranging from computer errors to vendors performing incorrect calculations on your usage.

If you don’t have a smart meter, try providing your provider with regular meter readings. This will help them track your usage, then your direct debits might go down in the future.

If you believe that your supplier has increased your charge unfairly, you can dispute it.

What are energy suppliers not allowed to do?

Your provider cannot increase your direct debit payments simply to raise equity.

They must take all reasonable steps to establish direct debit payments based on current and accurate information about a customer’s current consumption and rate, as well as other factors, including customer credit balances. .

Ofgem says it expects providers to regularly assess their customers’ direct debit amounts to ensure they are appropriate.

They are also not allowed to hold your credit without a good reason.

How much notice will I receive if my bills increase?

You must be notified 10 to 30 days before the increase.

The Direct Debit Guarantee, which covers all payments and is governed by Pay.UK, states: “If there is a change to the amount, date or frequency of your Direct Debit, the organization will notify you (normally 10 business days) prior to your account being debited or as otherwise agreed.

“If you ask the organization to collect payment, confirmation of the amount and date will be given to you at the time of the request.”

Should I withdraw any credit I have?

Customers can ask their supplier to refund their credit balance.

Suppliers must do so promptly unless there are reasonable grounds not to, and they must explain to the customer why.

But keep in mind that by doing this you are taking money out of the pot for your next bill.

My direct debits have increased by more than the price cap, what should I do?

If you think your direct debit payments have exceeded both the rate cap and your usage, rate, and credit balance, contact the company and ask for a breakdown of the additional charges.

If you are unhappy with the outcome or if it has been more than eight weeks since they attempted to address your concerns, you can report this to the Energy Ombudsman.

The ombudsman can ask a company to correct a problem, apologize and explain what happened. They can also oblige a company to pay compensation.

Have a question about rising energy bills? Contact our mentors: