Pre-paid Gas and Electricity Customers Penalised for Not Using Direct Debit

In the last month it has come to light that energy customers have been severely overcharged for their gas and electricity by not opting in to direct debit schemes. Although the majority of British customers prefer using direct debit, many customers find it easier to budget by only paying for the energy they use rather than working from an estimate.

According to a recent report from the National Housing Federation (NHF), consumers who used alternative pay schemes outside of the usual direct debit option were being overcharged a massive £464 million over the last three years. In an ideal world, direct debit should present an ideal solution for both consumer and provider, as the gas and electricity suppliers get a constant and reliable stream of revenue direct from customers' bank accounts, and customers get cheaper energy as a result.

The reason gas and electricity is cheaper with direct debit schemes is that it costs the energy suppliers money to install and maintain pre-paid gas and electricity meters. Companies also like the convenience and security of direct debits which do not rely on customers sending in cash or cheques on a regular basis but go straight to the customer's account. Hence suppliers are willing to offer cheaper gas and electricity to customers who are willing to pay by direct debit.

Energy regulator Ofgem estimates that it costs suppliers an additional £87 a year to maintain pre-paid gas and electricity meters, but some families paid in excess of £500 more for their pre-paid meters, well above the requisite amount. Ofgem have since clamped down on such practices from energy suppliers and customers should not be penalised overly for using alternative payment methods.

However, the point still remains that using direct debit is one of the best ways to secure cheaper energy. Not only is it cheaper, it is also more convenient for customers to not have to remember to pay their bill each month.

Be vigilant though! Suppliers charge direct debit schemes based on averages, which often means customers will be overcharged for energy they haven't used. You can monitor if you are paying too much by checking your meters regularly and contacting your gas and electricity suppliers to check their estimate and your meter reading correlate. You can always get a refund for energy you have been charged for but haven't used. Don't accept credit on your bills; make sure you get your hard-earned cash returned to your bank account.