Energy bills to rise for variable tariff customers under the Energy Price Guarantee

Energy bills for households on variable tariffs rose on 1 October 2022, with those customers paying an average 27% more over the following year, according to Which?¹. The consumer body said the increase means suppliers will raise direct debits to cover the additional cost¹.

The rise applies to variable tariffs even with the government's Energy Price Guarantee in place¹. Direct debit is the most popular way to pay for energy, and almost all providers discount payments made this way, making it usually the cheapest option¹. A direct debit is not the same as the bill itself: it is a set monthly or quarterly amount based on the supplier's estimate of annual use, divided across the year, so credit builds in lower-usage periods and is drawn down in higher ones¹.

Which? reported that when providers reviewed payments in April 2022, it heard from people who saw increases to their direct debits far above the increase to the price cap¹. In July, energy regulator Ofgem announced an urgent review into direct debits rising at rates much higher than the price cap¹. Which? said the review found "flawed" processes and a spectrum of weaknesses in companies' approaches to setting direct debits¹.

"In July, energy regulator Ofgem announced that it had conducted an urgent review into direct debits increasing at rates much higher than the price cap."

Suppliers must review a direct debit at least once a year to check it matches actual use, and this applies even on a fixed deal¹. Under the Direct Debit Guarantee, a supplier must tell a customer about a payment increase before it happens¹. Which? said a supplier must explain how it calculated the amount and give the meter readings used, and that a complaint can be escalated to the energy ombudsman¹.

Why it matters for households

A direct debit is a forecast, not a meter reading, so a rise in unit costs feeds through into monthly payments before the extra energy has been used. For a household, the practical effect is that the amount leaving the bank account each month can move by more than the change in the underlying rate, because it also reflects the supplier's view of how much energy the home will use¹. That forecast is what determines whether credit builds up or the account runs short.

Which? said it is wise to aim to have no more than two to three months' worth of payments in a credit account, with a possible exception where credit has been built deliberately over summer to cover winter¹. A customer can request a refund of money owed at the end of the year, and providers must pay it unless they have a good reason not to, which they must justify¹. If a supplier stopped trading while a customer was in credit, that money can be claimed back from the new supplier, though there is no set period for the process¹.

For energy independence, the balance held by a supplier is money a household has paid but not yet spent on energy. Keeping that balance proportionate, and knowing actual usage, is what allows a household to challenge a figure it believes is wrong. Which? said suppliers must treat customers fairly and agree a manageable payment plan, with options that may include a payment break, a payment reduction, additional time to pay, access to hardship funds, and inclusion on a priority services register for vulnerable customers¹.

What happens next

Suppliers will continue to review direct debits against estimated annual use, at least once a year¹. Where a customer disputes an increase, the supplier must explain its calculation and provide the meter readings used; unresolved complaints can go to the energy ombudsman¹. The Warm Home Discount, worth £140 a year, is available to eligible households¹.

Sources1 cited

1. Why are energy direct debits so high? - Which?, which.co.uk