With the rising costs of energy and water over the past few years it is easy to find yourself in the position of being either greatly in credit or, more worryingly, severely in debt to your utility company.
The problem has arisen due to a combination of rising prices for all utilities and the lack of active management of accounts by the companies that provide the services. For example, there is only a requirement on electricity and gas companies to read a meter every two years. In the meantime they are able to rely on either estimated readings (based on some notional assumptions about how you may be using your energy) or customer submitted readings. Either of these can lead to the actual consumption being wildly different from the estimated and charged for amount.
With costs being so high, many people try to do the best thing and spread the cost of their utilities over a payment plan. To do this, the provider uses information supplied by you to forecast the likely annual spend and then simply divides it by twelve to get to a monthly amount to be paid. This usually means that during the summer months (when heating and lighting usage is much lower) you will build up a surplus in the account and draw down against this during the heavy usage winter months. The challenge comes in that energy prices vary and it can be hard to know exactly what tariff you were on or are on now. The actual bills that arrive are usually meaningless to anyone but an engineer since they convert volume of gas or electricity into other units of consumption. Add standing charges and other costs and it is not difficult to see why many find it hard to keep tabs on where they are with their account.
Deregulation of the energy markets in the 1970s was supposed to improve competition and improve transparency for customers. The results, to many, have been quite the reverse since the wide array of tariff structures and charging bases make it hard to tell who is the best or cheapest energy supplier.
Energy prices have risen significantly over the past few years as our own North Sea Gas and oil has diminished and we become more dependent on imported fuel for our energy needs. Whilst there are many comparison websites to help choose which provider would supply the best deal, you need to have a basic understanding of your consumption to get a reasonable estimate.
As a consequence of the bad proactive management of the energy companies and consumer ignorance, many have been paying monthly amounts that are insufficient to pay off the actual bill when it is delivered after a true meter reading. Consumers have been left facing bills for hundreds of pounds and possibly facing a position where their supplies could be cut off for non payment. All of this because they tried to do the right thing and spread their energy costs to help with budgeting.
Consumer pressure is now starting to bear some fruit as energy companies are responding by taking more regular actual meter readings and annually changing the direct debit amounts to more accurately reflect cost and usage. Some will allow arrears to be spread over future payments for those with genuine hardship needs.
So what can you do to avoid getting into debt over energy costs? You should submit meter readings when requested to do so. When someone calls, they will leave a card for you to return by post or with information on how to submit your readings online. When you have done this, you must check the next bill that you receive and see how your balance compares with the amounts being charged. You should have a credit by the end of the summer months and expect to be a little in debt as the winter closes. You can always make additional payments to your account if you feel that the debt position is building too high and speak to your supplier about increasing your monthly direct debit amount. If the account is more than £50 in credit at the end of a review year, the energy company should refund the surplus to you.
Sadly, you have to be more active in managing your energy and water accounts. The utility companies love to have your account in credit since they use the free cash in their business. However, they have demonstrated that they are poor at helping customers to manage their accounts so you must take an active part in keeping your costs in line with your usage. When considering switching provider, look for customer testimonials or for their policy on budget account payments to make sure you know what you should expect from them.