Energy direct debit warning as firms accused of hiking bills – your rights explained
ENERGY firms have been accused of hiking direct debits even when households are in credit.
Suppliers have been stashing away up to £2 billion of customer's cash, according to .
The companies, including Centrica and Shell, have been accused of using the money as a source of finance while households battle rocketing prices.
Millions of households pay for their energy through "fixed" direct debit payments.
Your supplier estimates how much energy you'll use over 12 months and splits your monthly payments equally across the year.
The amount can change if your usage goes up or down massively or gas and electricity rates change like with the energy price guarantee.
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Under the Energy Price Guarantee, a typical household that pays their bill by direct debit will pay no more than £2,500 a year.
This can sometimes mean you pay more for your energy than you're actually using, particularly in warmer months, and you build up credit.
Despite customers being encouraged to lower their energy usage to save money, The Telegraph found providers were increasing direct debit payments even if they are thousands of pounds in credit.
No rules prevent companies from using customers’ cash to keep their businesses running.
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Centrica denied using the funds as working capital.
Shell admitted using customer credit balances as working capital, alongside other funding it has access to.
It comes as energy customers prepare for a surprise rise in bills from January.
The regulator Ofgem still sets the price cap on what suppliers can charge and the next update takes effect on January 1.
This means the discount on bills will change very slightly from this date and millions could see an unexpected rise in their bills.
Martin Lewis has previously warned about a shock rise to bills from this date.
Some energy firms have decided to pass on these costs to customers, while others have not.
The Sun has put together a full list of firms hiking their costs.
How do energy direct debits work?
There are two main types of energy direct debits - fixed and variable.
Most energy customers pay a fixed direct debit, which means you pay a fixed amount every month.
Your energy company will work out the cost of your energy for the year ahead and divide this into equal payments.
Most energy firms will use the average amount of gas and electricity used in previous years to calculate your monthly instalments.
With a fixed direct debit you can spread the cost of your energy use without any surprises.
If your energy supplier has upped your fixed direct debit amount even though your usage is down, you can request that the fixed monthly charge is brought down - we've explained how to challenge your bill below.
Those on fixed direct debits are more likely to build up credit during the warmer summer months and if you're in credit but your direct debit has risen substantially this winter it's worth challenging it.
But some energy companies give customers the option to pay with a variable direct debit.
With a variable direct debit, you can choose to pay a varying amount every month or every quarter, depending on the energy you use.
You’ll pay for the energy you use, this means you'll likely pay more in the winter and less in the summer.
Some experts argue that this type of direct debit method makes it harder for households to budget in the colder months but if you only want to pay for what you use each month then a variable direct debit may be a safe bet.
How to challenge your bill
Before you dispute your bill it's worth using an energy calculator to work out exactly how much your usage costs on paper.
You also need to be aware of your rights.
If you pay by direct debit, then this monthly amount should be "fair and reasonable".
If you don't think it is, you can complain to the company in the first instance.
If you're not happy with the outcome you can take it to the independent to dispute, but there are a few steps before you get to that stage.
Your supplier must clearly explain why it's chosen that amount for your direct debit.
If you've got credit on your account, you have every right to get it back - although some experts recommend keeping it there through the summer, so your bills don't go up in the winter when you use more energy.
Beware too that you could face a larger bill later on if you ask for all your credit back.
Your supplier must refund you or explain exactly why not otherwise and the regulator, Ofgem, can fine suppliers if they don't.
If you are disputing a bill, taking a meter reading is a must.
That way the company 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.
Martin Lewis' MoneySavingExpert team says that if you find you're always in credit, you should request the direct debit be lowered to reflect your actual annual usage and meter readings.
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.
If you don't have success in negotiating a lower payment then you can put in a complaint.
You can usually get in touch with your provider by email, letter or telephone, but keep a record of contact that you make so you can reference it later if need be.
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Charities like Citizens Advice have template complaint letters you can use to help with the process.
Meanwhile, free online tools from Resolver.co.uk can also help you track and manage a complaint step-by-step.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]