We’re being inundated with predictions for the energy price cap announcement coming on 26 August, to take effect on 1 October. And each seems to paint a bleaker picture than the last.
The price cap dictates how much energy suppliers can charge customers for variable tariffs, also known as default or out of contract tariffs. Energy regulator Ofgem gives an illustrative figure for this cap based on a typical household’s bills. At the moment, these sit around £1,971 - industry analysts at Cornwall Insight have predicted that the next cap will push this to £3,582 from October and £4,266 from January.
That’s an 82% increase on bills from October, with a further 19% increase in January.
Other energy experts are predicting increasingly alarming higher figures. Ultimately, we won’t know what the real number will be until Ofgem makes its announcement at the end of August.
Not unsurprisingly, many people are now considering what would happen if they weren’t able to pay the amounts requested of them, or if they chose not to.
A campaign asking consumers to stop paying their energy bills on 1 October if they aren’t reduced is gaining momentum, promoted on social media channels as well as through leaflets.
The Don’t Pay group states that if it reaches 1 million consumer pledges by 1 October and the forecast price cap increase goes ahead, it will call on those who’ve signed up to cancel their direct debit payments.
Others suggest switching from direct debit payments to paying on receipt of your bills. But what does that mean for you? We’ve pulled together the facts.
Ease the squeeze on your household bills with our latest cost of living advice and tips
What are your rights if you can’t pay your energy bills?
As a customer of an energy supplier, you have the right to support if you’re struggling to pay your bills. If you cannot pay the amounts asked of you, rather than simply cancelling your payments you should contact them to discuss your options. An affordable payment plan should be offered to you.
- Find out more about what to expect in this process in our guide to the help available if you’re struggling with your energy bills.
If you stop paying your bills altogether, you don’t have legal protection. That’s because you’re in a contract with your energy supplier, and your contract will state that it can increase prices according to Ofgem’s price caps. So while it’s a tough conversation, it’s much better to open a dialogue with your supplier than to cancel payments completely.
- Stay safe: If you are communicating with your provider make sure it’s legitimate. Here are 7 known energy scams, as well as 5 big cost of living scams to look out for.
What can energy companies do if you don’t pay?
If you currently pay by direct debit or quarterly billing, rest assured that it is highly unlikely that your energy company will disconnect you from your supply if you stop paying. It must explore all other payment options with you first, including installing a prepayment meter.
Because prepayment meters are subject to a higher price cap, this would mean a long-term increase to your bill payments.
Disconnection is always a last resort, and a number of steps would need to be taken first. Your bills need to be overdue by 28 days and all other options must have been explored for your supplier to contact you about possibly disconnecting you, with reasonable notice.
If your supplier has signed up to the Vulnerability Commitment, vulnerable groups, including disabled and elderly customers, are protected from disconnection during the winter months.
However, if you use a prepaid meter, your energy supply might stop if you don’t top it up.
What are the long-term consequences of not paying bills?
Over time, energy debts - known as arrears - can be collected by debt collectors and interest can be added to them. This is likely to have a negative impact on your credit rating, which will affect your eligibility for loans in the future.
If bills continue to go unpaid, energy suppliers can escalate cases to court and bailiffs to reclaim the money owed and to move your household onto a prepayment meter. These are subject to an even higher price cap.
They need to get a court warrant to fit mandatory prepayment meters into your home. If this goes ahead, your arrears would be added onto them.
Energy arrears are considered a ‘priority debt’, which means they need to be paid ahead of other debts such as credit card payments.
What if you don’t want to pay by direct debit?
There are a number of ways to pay for the energy you use, and you are entitled to choose whichever method suits you best.
It’s almost always cheaper - by a considerable amount - to pay by direct debit. You’ll pay higher rates if you want to pay in a different way.
If you pay on receipt of your bill, you will be sent a bill for the energy you’ve used and asked to pay for this either monthly or quarterly. It’s worth noting that these bills will be particularly high over winter, when you are using more energy, and lower in summer.
- Read more about all the different ways to pay, and how to get the cheapest bills in our guide energy bills: your questions answered.
No matter which way you pay, it’s really important to submit frequent, accurate meter readings to ensure you’re only paying for what you use.
If you have a smart meter, it should send regular readings to your supplier for you, but you should occasionally check your statements and compare them to what your meter is showing to make sure this is happening as it should.
When should you contact your energy provider?
If you cannot afford to pay your energy bills you should contact your energy supplier as soon as possible.
You can also contact your supplier to discuss any large bill changes that you’re confused about. If your direct debit has suddenly increased, and you can’t figure out why, they have to justify their decision. You are within your rights to ask for this to be reduced if you believe you can pay for your energy usage with lower payments.
If you think that your energy company is overcharging you due to an error on its part, or is unfairly chasing you for money, you can make a formal complaint.
If you cannot resolve your complaint with your provider, you can take it to the energy ombudsman. Your complaint must be for a valid issue - not just that you don't agree with high prices.
- Find out: how to complain about your energy bill
What extra support is available for energy customers?
There is help available for paying your bills, including the £400 government grant due to every household over autumn and winter.
For those on low incomes and recipients of certain means-tested benefits, including Pension Credit, additional help is available, including the Warm Home Discount and Winter Fuel Payment. There are also private schemes from energy suppliers themselves, and local councils. The government’s cost of living support will also extend to these customers.
- Find out more about: what government cost of living help you are entitled to and help if you’re struggling with your energy bills
There has been much debate as to whether the government’s support package, announced earlier in the year when price cap predictions were lower, is sufficient to meet the needs of the increasing number of households that could find themselves in financial crisis this winter.
Which? believes that the government must move quickly to increase the amount of financial support it is providing to help families and households make ends meet, and energy firms should set out the further actions they will take to support consumers through this period.
source https://www.which.co.uk/news/article/what-happens-if-you-dont-pay-your-energy-bills-azBCJ8m7MhjS