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Energy direct debits help

Lower your payments & get money back

Andrew Capstick
Andrew Capstick
Updated 10 May 2022

Paying by monthly direct debit can cut bills by £100+/yr. Yet direct debits are based on an estimate of your usage. If that's wrong, you can end up overpaying each month. And right now, providers are hugely upping direct debit payments off the back of the recent 54% hike to the energy price cap – so make sure yours is fair.

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Many have told us they've seen their direct debits rise by way over the average price cap rise. Of those who replied to our recent survey, at least 30% of British Gas, Octopus Energy and Shell Energy customers who were in credit and on price-capped tariffs told us that they've seen their direct debits double – even though the price cap rise is 54% on average.

Across all firms, 25% of customers in this situation reported direct debits doubling or more. See the results of our energy direct debits survey for full info.

Firstly, key points on energy direct debits

Here are the key need-to-knows about how energy direct debits work.

  • 1. What you pay isn't necessarily the same as the cost

    It's important to be clear the price you're charged and the amount you pay every month aren't the same thing.

    • The price of the energy

      Energy costs are set by suppliers. Usually, they're a combination of a daily standing charge plus an additional amount based on energy used, which is measured in kilowatt hours (kWh).

      After all's said and done, this is what your energy actually costs. The lower the rate and the less you use, the less you owe.

    • What you pay

      With a monthly direct debit, the company estimates your annual usage and spreads it over 12 months. In summer, you'll usually build up a credit as you use less, but you'll likely need this surplus for winter.

      But some energy bills are massively overestimated, where the amount paid seems to have been de-linked from the cost of the energy you actually use. Many customers feel their suppliers set direct debits willy-nilly.

      Remember, even if you're on a fixed tariff, your direct debit can go up if your supplier thinks you'll use more.

    What's more, in normal times, when people have switched their energy deal, bill confusion has left many thinking they haven't gained. For example, people have switched to a cheaper energy company, only to find their direct debit increased. This is because it's estimated wrongly, but you'll get a refund later so you'll still save.

    Here's an example...

    Beccy Tricity's been with her provider for 10 years and her £80 a month direct debit is set to about the right level. She rightly does a comparison and finds EnergyMonster is 10% cheaper, so she'd expect to pay £72 a month.

    However, EnergyMonster sets her direct debit at a mammoth £100 a month. Therefore, for a year, she's overpaying by £30 a month and may be unable to change it. Of course, in the end, she'll get the money back, and will have saved on her unit rate, yet in the meantime, the overpayments mean less cash in her pocket.

    The fact that people can end up with a higher direct debit, after switching to what they think is a cheaper supplier, is damaging to the industry. It's a huge disincentive for people to switch, which ultimately stops suppliers winning new business and stops consumers saving cash.

  • 2. Check what you're paying now as many providers are hiking payments following a 54% hike to the energy price cap

    We've been hearing that many are seeing their direct debits rising massively right now, with providers reviewing payments due to the average 54% increase to the energy price cap which kicked in on 1 April.

    While big hikes to direct debit payments are, unfortunately, expected right now, it's important to check your increase is proportionate to the cost increase. See Martin's 'Why your energy bill might be going up by MORE than 54%' video for why yours might have gone up by more than expected.

    As the price cap has risen 54%, if you're on a capped tariff, expect a similar hike to your direct debit payment.

    If you're coming off a cheap fix and rolling on to a standard tariff, you could be paying double, so expect a similar increase to your payment. 

    if you're in credit and your direct debit is rising way above the increase to the gas and electricity rate, there's an issue. If that's the case, see how to fight back.

  • 3. Paying by direct debit is cheaper

    While there are problems, there's one important fact in favour of setting up a monthly direct debit – it's usually around 6% cheaper than any other way of paying. For maximum savings, combine it with:

    • Switching energy tariffs. Usually the best way to save is by switching to a cheaper energy deal. However, right now, due to record wholesale energy prices (what providers pay for energy) there are no cheap deals, so it's likely switching won't save you money for the moment.

      To check, you can do a full market comparison with our Cheap Energy Club, or if you find choosing a tariff difficult, we can help you pick the right one with our Pick Me A Tariff tools.
    • Always give meter readings. Give your supplier regular meter readings and it'll give you a more accurate bill. If you don't, you may find you're paying for high estimates.
    • Smart meters. These send meter readings to your supplier automatically, so you should get an accurate bill. Some older models lose this ability after switching supplier though, so you may need to start doing it manually again. See the Smart meters guide for more.

    If you use heating oil to heat your home, instead of gas or electricity, it's different. Paying by direct debit won't get you a discount. But it can be convenient as it allows you to spread the costs. Heating oil users can learn simple steps to save in our Cheap heating oil guide.

  • 4. Pay too little and you can end up owing your supplier

    While this guide focuses on excessive direct debits, the other worry is when they're set too low. This can happen when you use more energy than expected.

    Remember, lowering your direct debit doesn't lower the cost. It just means you'll pay less each month, then get a huge bill at the end of the year which you may not expect and will be chased for. If the debt gets too high, you may not be able to switch.

  • 5. Ask for a payment plan if you're struggling to pay off debt

    If you do find yourself in debt, talk to your supplier as soon as you can. If you just ignore the debt, your supplier could contact you about the possibility of installing prepayment meters.

    According to the regulator, suppliers must work with you to agree a payment plan you can afford.

    Payment plans have to factor in both your financial circumstances and your ability to pay. The debt is then repaid over a number of months alongside what you pay for your ongoing energy use.

    You could also get payment breaks or direct debit reductions, more time to pay, and access to supplier hardship funds. See our What do to if you're struggling to pay your energy bills? guide for full info.

    If your supplier won't help you, complain and challenge its decision.

    • Energy hardship funds

      If you have been hit by a huge bill and find yourself in arrears there's help available. Some providers offer an energy fund scheme to help with arrears if you're facing serious financial hardship. 

      To apply for help with arrears you'll need to be an account holder – you'll need to complete a full income and expenditure budget sheet along with proof of your income, plus give details on how your arrears have built up, eg, due to illness or redundancy, and say how the grant will help you. It can take several weeks to process your claim.

      Exact requirements vary – some say you need to be in receipt of certain benefits for example – but those with the greatest need are prioritised on a case by case basis.

      You can apply via these links:

      Open to anyone (not just its customers): British Gas Energy Trust

      Open to their customers only: Bulb Energy Fund / EDF Energy Customer Support Fund / E.on Energy Fund / Scottish Power Hardship Fund / Ovo Energy Fund. 

      For other more info of grants, loans and other help available, those in England and Wales can check the Simple Energy Advice website, while those in Scotland can find out more on Home Energy Scotland. 

      Also see the Cheap Gas & Electricity guide.

Know your rights

The regulator's licence conditions set out guidelines for fair and reasonable direct debits. Under condition 27 of the Gas Supply Licence, suppliers must:

  • Set fair direct debits. They must take reasonable steps to ensure customers' direct debit levels are based on the best available information, including the quantity of gas and electricity supplied.

  • Give clear explanations. If you ask, your supplier must clearly explain why it's chosen that amount for its direct debit.

  • Refund credits. If a credit has accumulated and a customer asks for it back, suppliers must refund it. If the supplier thinks the credit should be withheld, the reasons why must be clearly explained but customers can challenge this (see how to challenge it).

In theory, this should make it much easier for consumers to get fair direct debits set for them and reclaim refunds where due. As this is a licence condition, energy regulator Ofgem can fine suppliers if they breach it. Following the record increase to the energy price cap in April, Ofgem is currently looking at whether suppliers have been increasing direct debits by more than necessary, after numerous reports of people seeing their payments go up by double or more. 

If you are in credit, many energy companies, including all of the big six, offer automatic refunds when you're in credit (though the threshold for this happening varies). However, in many cases it's still be up to consumers to demand a refund.

Annoyingly, Ofgem doesn't set out what's "fair and reasonable". Instead, it leaves it up to the supplier to decide. If you disagree and the company won't sort out your complaint, you can go to the free, independent Energy Ombudsman to dispute it.

How to fight back

While there are guidelines suppliers must adhere to – and many offer automatic refunds – you could often still have a fight on your hands to get your cash back. After all, while the companies have your money, they can earn stacks of interest. And right now there are fears struggling firms are increasing direct debits to improve cash flow in these unprecedented times for the energy market.

Here's how to make sure you get what you're owed:

Step 1: Always do a meter reading and send it to your supplier 

meter reading

Don't let the company rely on its estimates, that's just a great excuse to set high direct debits. Keep it as accurate as possible. The info on how to read your meter will be on your bill, or look online. Usually you can give readings online, or by calling an automated answer system – or sometimes you can even call up and speak to an actual person.

If you've never given a meter reading before and have been relying on estimates, then do the reading and wait for the updated bill before even attempting to ask to have the debit lowered.

Step 2: If you're heavily in credit ask for your money back

Energy usage is seasonal, so it's expected that between summer and winter, you may have racked up some credit. Yet if you're heavily and disproportionately in credit, then before asking to lower the direct debit, try to get a chunk of the amount you've overpaid back – though remember to factor in price rises and the fact we are heading into the higher-use winter period.

According to Ofgem, suppliers must refund accumulated credit, though it doesn't say how much it thinks is fair.

As the table below shows, many energy companies have payout policies, and the majority issue refunds automatically each year on the anniversary of when you signed up to their tariff (though the threshold for getting a refund varies).

That said, you may still have to chase. If you think you're owed, call and ask for your cash back. Quote condition 27 of the Gas Supply Licence, which states credits must be refunded and direct debits fair. If it won't reset it, you're entitled to a full explanation, and you can complain to the ombudsman. 

Providers' refund policies (correct at May 2022)

PROVIDER ANNUAL CREDIT REFUND POLICY (1)
British Gas It'll automatically refund you anything over £75. It says it will keep up to £75 in credit on your account to lower your future monthly payments.
E.on It will refund any credit you have. You can choose to keep it in your account to reduce your future direct debit. 
Scottish Power If you're in credit by more than one month's payment value or by over £75, you'll get an automatic refund. If you're in credit by less than this, Scottish Power says you can still request a refund if you provide up-to-date meter readings.
EDF Provided it has an up-to-date meter reading, EDF will automatically refund you any in-credit amount above £40.
SSE If your account is in credit by more than one month's payment it will automatically refund you everything over this.
(1) Paid on the 12-month anniversary of when you signed up to the tariff.

Step 3: Call to ask for a lower direct debit

call now

You have a right to ask for an explanation of why your direct debit is set at a certain level, so call up and do it. If you're always in credit and it isn't just seasonal, politely request the direct debit be lowered to reflect your ACTUAL annual usage and meter readings.

It's possible you may have a small debt on the account too. In this case, paying off a £20 debit balance to bring the account to zero is likely to give you more leverage when renegotiating the direct debit. Customer service staff may sometimes be limited in what they can do due to their computer systems, but paying off the debt may give them leeway.

Do remember electricity and gas companies rightly should err very slightly on the side of overpayment rather than underpayment, as otherwise you could get a shock at the end of the year with a big catch-up bill. If you're unsuccessful, see the next step.

Step 4: If they won't budge on the phone, formally request the direct debit's lowered

At this point, you've gone through the usual protocols, and it's here where you have to make it not worth the energy company's time to continue making you overpay.

Writing a formal letter indicates you're taking it seriously and you're unwilling to let it lie. Write to say your direct debit is set too high, it breaks the energy retailers' code, and threaten if there's no change, you'll ditch and switch.

Your credit is protected if your provider goes bust

Over 3.5 million people have been affected by supplier failures since the last September, but don't worry – you're never at risk of losing your energy supply and any credit you're owed will be returned.

Under regulator Ofgem's safety net rules, when a supplier fails a new one is appointed to take over, and once it does you'll usually be moved on to its standard tariff – the most expensive type of tariff.

If your account is in credit when the supplier goes bust, the new supplier Ofgem appoints to take over will either pay it to you – even if you switched away before it stopped trading – or add it to your new account to pay for future energy use once it takes over your supply.

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How to complain about your energy provider

The energy industry isn't known for having great customer service across the board, and while a provider may be good for some, it can be hell for others. Common problems include incorrect bills, switching issues, direct debits being too high, refund delays and more. 

It's always worth trying to call your provider to sort the issue first, but if not then you can use free complaints tool Resolver. The tool helps you manage your complaint, and if the company doesn't play ball, it also helps you escalate your complaint to the free Energy Ombudsman. 

In the forum: Tell us your energy direct debit successes and discuss energy overcharging.

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