And it is likely to get worse – 2008 saw energy price hikes of 42% or £381, however many customers have only just started to see these increases reflected in their monthly direct debit payments.
Just under three quarters of households (74%) pay for their energy bills by direct debit, but almost a third (30%) have only had their direct debit increased in the past three months. As a result, many are now playing catch up to make up for months of underpaying.
The delay is due to suppliers having to review accounts before amending direct debits. They cannot increase direct debits automatically because not everyone will need their monthly payments to go up. In fact, following last year’s price increases and subsequent account reviews, 4% of households had their direct debits decreased.
However, 68% of direct debit customers saw their monthly payments increase and, confusingly, some may have seen increases even as suppliers were announcing price cuts.
The average energy direct debit is now £85 per month. Suppliers increased direct debits by £22 a month on average to compensate for last year’s price increases. However, almost one in ten households (9%) saw their direct debits increase by more than £50 a month. At the least, this adds up to an eye-watering £600 a year extra they have to find.
uSwitch said that not surprisingly, when advised of increases to direct debits, a third of people (33%) felt compelled to contact their supplier. Worryingly, 4% cancelled their direct debit, which means that the cost of their household energy could increase as they will be losing out on valuable discounts. A further 4% are thinking of moving onto a prepayment meter to try to control their energy bills – again they risk increasing the cost of their energy as a result.
Ann Robinson, Director of Consumer Policy at uSwitch.com, said: "Despite energy prices now starting to fall, almost a third of direct debit households have only started to feel the impact of last year’s price hikes within the last few months. Not only has this raised concerns over affordability, but it also suggests that energy debt is likely to continue to grow as so many households will be playing catch up.
"The danger is that consumers will cancel their direct debit because they cannot afford the increases, but will then end up paying more for their energy because they will lose valuable direct debit discounts. Owing money to an energy supplier can also prevent people from being able to reduce energy bills by moving to a lower cost energy deal. Households cannot afford to have either of these options closed to them in today’s economic environment.
"Consumers have to start taking a more active role in managing their energy bills. If you are going into the red and can afford to increase your payments, contact your supplier. Make sure you are paying the lowest possible price for your energy by shopping around, cut down on the amount of energy you use and make sure you or your supplier is taking regular meter readings. Relying on estimated bills can be a shortcut to debt."
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