BRIGHT SPARK
Martin Lewis Show – Money expert confirms way to slash rise in direct debit on energy bills
MARTIN Lewis has revealed how some households may be able to slash direct debits on energy bills this winter.
On last night's episode of The Martin Lewis Money Show on ITV, the personal finance guru told viewers that they have a right to have their energy direct debit reduced if they think they're too high.
1
He advised struggling bill payers to take regular meter readings and use an online direct debit calculator to estimate what they should be paying based on usage.
Martin said that the average direct debit should be double what they were last year - so if it much higher than that Lewis urged viewers to "politely" call their energy companies to query it.
He added that if the company cannot justify the rise, they are bound by its license to reduce it.
However, be careful not to end up in debt to your supplier by lowering your energy bill by more than is necessary. See our explaination on this below.
READ MORE IN MONEY
Under the Government's Energy Price Guarantee, the average household will pay no more than £2,500 a year on their energy bills.
However, as Lewis reminded viewers, this is not a cap on total cost but on unit prices - so if you use more energy, expect to pay more.
Speaking earlier on ITV's Good Morning Britain, Martin said the earlier-than-expected end to the Energy Price Guarantee will leave many facing higher costs.
Martin said that he "assumes in April, that we'll go back to the old energy price cap methodology set by Ofgem and based on wholesale prices."
The Government has said the blanket bill freeze will instead be replaced by more targeted support to help the most hard-up households.
Most read in Money
The exact help has not yet been decided and new Chancellor Jeremy Hunt has said a review by the Treasury will be launched.
This could mean that households on the lowest incomes may be better protected from a bill shock next April.
Martin said that if the original price cap returns, the average household energy bill could rise by over 70% in the spring.
New predictions by experts at Cornwall Insight suggest that bills will rise from £2,500 to £4,350 a year from April 2023 without the freeze in place.
But other forecasts suggest that the average bill could be even higher from next spring.
Consultancy firm Auxilione forecasts that average bills could hit £5,078 and RBC Capital Markets predicts £4,684 a year.
How do energy direct debits work?
If you pay by direct debit you'll usually pay your provider a set amount every month - but this isn't actually your bill.
Your bill is the amount you're charged for your energy.
It's a combination of a standing daily charge and your metered energy usage.
It will be different every month, depending on how much you use.
By paying your direct debit ensures there is always enough money in your account to cover this changing cost and keep you in credit.
Energy firms estimate how much they think you'll use over the year and divide this by 12 to determine your monthly direct debit amount.
If you pay quarterly, the yearly estimate will be divided by four.
It's important to be aware that you might be paying for more than you're using at some points during the year and particularly over the summer.
This is because it's unlikely that you'll be paying to heat your home during the warmer summer months.
But this tends to balance out over the year - so if you lower your direct debit now, don't be surprised if you get a bill shock later on in the Winter months.
It may be worth switching to direct debit to get the bill discount if you don't already pay that way.
Can I not pay for what I use via direct debit?
Customers of several firms have a choice over how their direct debits are set up.
Instead of paying a fixed direct debit, customers can choose to pay with a "variable" direct debit.
Read More on The Sun
With this type of direct debit, you can choose to pay a varying amount every month or every quarter, depending on the energy you use.
READ MORE SUN STORIES
Unlike a fixed direct debit, with a variable you’ll pay for the energy you use, this means you'll likely pay more in the winter and less in the summer.
We asked energy experts to assess who should and shouldn't fix their energy direct debits or switch to variable bills.
Topics