Energy Direct Debits help

Lower your payments & get money back

Updated 7 January 2025

Paying your energy bill by monthly Direct Debit can save more than £100 a year compared with paying when you receive a bill. Yet with Direct Debit, suppliers base them on an estimate of your usage over a year, and then divide this by 12. If that's wrong, you can end up overpaying – and last year around £3.5bn was held in credit by suppliers. Here's how to make sure your bill is fair and what to do if it's not.

Use our calculator to check your Direct Debit is right under January's Price Cap rates

On 1 January, the Energy Price Cap rose by 1%, on average, for a typical household. If you're on a price-capped standard tariff – and about 80% in England, Scotland and Wales are – then you can check if your Direct Debit amount is along the right lines based on January's rates.

Just tell us your energy usage and what region you're in (as rates differ across regions) and we'll give you an estimate of what you should be paying.

Key points on energy Direct Debits

Here are your 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 that 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, measured in kilowatt hours (kWh).

After all's said and done, this is what your energy actually costs. The lower the rates 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 credit as you use less, but you'll likely need this surplus for wintertime.

But some energy bills are massively overestimated, where the amount paid seems to have been separated from the cost of the energy you actually use. Many customers feel their suppliers set Direct Debits willy-nilly. We've more details on How energy suppliers set Direct Debits.

Remember, even if you're on a fixed tariff, your Direct Debit can go up if your supplier thinks you'll use more.
2. 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 about 6% cheaper than paying on receipt of a bill. For maximum savings, combine it with:

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 you switch supplier though, so you may need to start doing it manually again. See our 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.
3. 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 suppliers.

Read Martin's blog on how to Get £100s credit back from your energy firm – it’s all about the Direct Debit cycle…
4. 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 to do 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.

Know your Direct Debit 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.

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 unfair Direct Debits

While there are guidelines suppliers must stick 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. 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

Don't let the company rely on its estimates: that's just a great excuse for it to set high Direct Debits. Keep it as accurate as possible by giving regular meter readings.

The info on how to read your meter will be on your bill, or look online. You can usually give readings online, via an app, or by calling an automated answer system – or sometimes you can even 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 your supplier to lower the Direct Debit, try to get a chunk of the amount you've overpaid back.

Ofgem has reported that between October 2023 and September 2024, energy suppliers held around £3.53bn in customer credit, and at the end of September 2024, the average household energy account was in credit by £267 – roughly one month’s bill.

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

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 Energy Ombudsman.

Step 3: Call to ask for a lower Direct Debit

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 due seasonal changes to your usage, 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, for example, 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 that 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 be lowered

At this point, you've gone through the usual channels, 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 and threaten if there's no change, you'll ditch and switch.

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Can I just pay for what I use by Direct Debit?

The most common type of Direct Debit are 'fixed' monthly Direct Debits, yet there is another option known as 'variable' monthly Direct Debit that is available at E.on Next, EDF, Octopus Energy, Scottish Power, So Energy and Utility Warehouse. It’s not currently available from British Gas or Ovo.

The rates on both types of Direct Debit are the same, so in the long run there is no cost difference, the real impact is on your cash flow (what you have coming in and going out each month).

'Fixed' monthly Direct Debits spread costs over the year: Your supplier estimates how much you'll use over the next 12 months, and splits the payments equally with the idea to make budgeting easier. The amount can change if your usage goes up or down significantly, or if gas and electricity rates change. Most people pay this way.
'Variable' monthly Direct Debits pay for what you use: To do this you must either a) have a working smart meter or b) give meter readings every month. What you pay will then depend on what you use each month. Expect much higher bills in the winter and lower in the summer – so this can be a cashflow hit. You generally get a bill a few weeks before your payment is due to go out, letting you know how much your provider will take that month.

So who should be switching to variable Direct Debit – over to Martin…

"While it causes many frustrations, if the standard monthly fixed Direct Debits didn’t exist, it’s the type of thing I’d be calling for energy firms to introduce. Smoothing out your costs over a year is a big boon for budgeting and done right should make life easier. So if it isn’t an issue for you, stick with it.

"The problem comes when you feel the estimated Direct Debit is wrong – and usually the real frustration comes when it is too high – especially if you’ve built up lots of credit. The first thing I’d try and do is see if you can fix that, make sure you’re on a smart meter or giving regular meter readings. If you are, then use our Is your Direct Debit fair? Calculator to see whether actually the Direct Debit is justified and just feels high because of the price hikes. If it isn’t fair, speak to them to try and get them to lower it.

“If none of that works, then variable Direct Debit becomes a decent option, but you have to be prepared to shell out more in the winter, and see big swings in what you pay."

"I'm much happier paying for what I actually use"

While it may not be right for everyone, some do prefer paying their supplier only for what they use, and we've even seen people successfully getting their credit back by moving to variable Direct Debits:

Thank you so much for your energy supplier tips and Direct Debit calculator. I used your calculator and could see I was being overcharged on my Direct Debit, and the only way I could get a current invoice to check I was still in credit was to change my Direct Debit to variable Direct Debit, which seems a better option.

After giving EDF meter readings yesterday and changing over to whole amount Direct Debit, it was confirmed this morning that I am £3,831.91 IN CREDIT! Which is being repaid to me.

- Debbie via email

Variable Direct Debit is far cheaper than ‘payment on receipt of a bill’

There are very similar payment methods, known as paying on receipt of a bill or paying on demand, where you get a bill each month based on what you've used, but here you'd pay by cash (a manual card payment or via the post office, for example) as and when you get the bill, rather than setting up a Direct Debit.

Yet this payment option costs substantially more. From 1 January 2024, paying on receipt of a bill is on average 6% higher than paying by Direct Debit. This means a typical home on Direct Debit will pay £1,738 a year, on receipt of bills it's £1,851 a year.

What happens to my credit if my provider goes bust?

Over 4 million people have been affected by supplier failures since September 2021, 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 onto 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.

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, 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.