Energy companies keep £1.2 billion of our savings
Energy providers are not only pushing up prices, but hanging onto our cash and robbing us of our savings.
More than half of energy customers are overpaying their gas and electricity bills, allowing the energy providers to benefit from an extra £1.2 billion each year.
Per customer this works out as an average overpayment of £80 every year.
But while the energy companies are holding onto this extra cash, customers are being robbed of the interest the money could make if it was in a standard savings account.
Energy bills
Every year 53% of us are paying more than we need to towards our energy bills, according to research*.
As we use less energy in the summer, when paying by direct debit, a surplus is built up which can then be used to cover more expensive winter bills.
But after winter many people still remain in credit to their supplier, giving it free access to this extra money.
Paying by direct debit
Paying by direct debit is a cheaper way of paying for your bills. 62% of people pay their gas bills by direct debit while 70% pay electricity bills this way.
However, as utility companies estimate bills for a household, this can be overestimated leading to customers overpaying their bills.
To avoid this, instead of blindly paying the direct debits, customers should regularly take their own meter readings. If you find your account is in credit to your supplier, you can ask for this money back.
Savings accounts
If this extra cash was put into a savings account it would at least start earning some interest. As you may need the money within a year, to cover higher payments, an instant-access account would work best in this situation.
The rates on instant access accounts are pretty poor at the moment and generally lie around the 2.5%, but it’s still better than nothing and you’ve got access to the cash when you need it.
Check out The best instant access savings accounts for more.
Confusing bills
Energy companies have been slated in the past for making their billing systems more complicated then they need to, as we highlighted in The best and worst energy bills.
If it was easier to understand what energy companies were charging, customers could see more clearly if they were paying more than they should.
Switching suppliers, if you can, will almost always save you money and it’s also a good way to avoid impending energy hikes. Our guide gives you a step-by-step guide to the switching process and you can compare energy costs across the market in our on our quote engine.
More on gas and electricity:
How to complain about your energy supplier
EDF announces biggest energy price rise yet
Is British Gas telling the truth?
*research from GoCompare.com
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Comments
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Great to see people like Johnmxn3 sucking on the purses of the vast majority of UK electricity consumers using the Feed in Tariff which refunds him far MORE than the value of the solar pv electricity he feeds into the system. The solar pv FiT rip-off along with ineffective low capacity factor wind follies are the main reasons our energy is so darned expensve. However, I am sure that such issues as low average annual light levels in the UK and his ugly roof top solar pv installation lowering the price of his house will bring some payback to the reat of us in the long term.
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What can we expect when there's no real financial education in this country? You don't suddenly end up £500 in credit on your fuel bill without the previous bill showing a significant credit. As for changing suppliers, if you know how many kilowatt hours (kwh) you are using, the comparison tool will tell you the cheapest alternative (but check with the supplier's website that the comparison site is quoting the correct rate). Applying the correct kwh usage should avoid the new supplier setting your direct debit too high, & if they do, you have the data to contradict them. If you don't know how many kwh you are using, how do you expect to countereact price rises or save money? Where the suppliers are being sneaky is introducing higher standing charges, which appears to be happening pretty much across the board, so don't be fooled by lower unit charges in isolation. Unless you are on your guard, the higher standing charge will lead to higher bills even if you reduce your power consumption.
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We are always advised to shop around and switch supplier - which is good. The down side is that if you do that every couple of years you don't build up sufficient history for your supplier to accurately assess usage for direct debit charges. In addition the variations in the good old British weather from year to year also effects consumption. They, of course, will always err in their own favour. So, although you can't put all of the blame on suppliers, you do need to remain vigilant. Most people like to make regular payments as that matches their income profile. Thus we all tend to build up credit in the summer to carry us over the winter, which actually sounds like good service to me. I've always found suppliers willing to negotiate when they ask for increased DD payments, but we also need to be realistic when talking to them. As far as I am aware we have a legal right to ask for a credit refund over a certain amount (£50?). So don't take no for an answer, take your custom elsewhere.
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10 November 2012