Is your fixed energy deal really fixed?

by Tim Deakin Domestic Energy News

Is your fixed energy deal really fixed?

Understanding the ins and outs of your deal is key to avoiding any nasty surprises

It’s a situation many of us are familiar with. You sign up to a new, cheaper energy deal only for the prices to go up after a few months. You think, this isn’t the deal I signed up for!

If this does sound familiar to you, you’re certainly not alone. Recent surveys have shown that customers have seen their direct debits rise unexpectedly by a third or more, while others have seen payment increases of as much as 50%.

But why does this happen, and what can you do to avoid it?

What does “fixed energy” really mean?

The thing is, when you choose a fixed energy deal, the word “fixed” typically refers to the “unit rate” rather than your total bill.

Energy tariffs are made up of both a standard charge (a set amount you pay daily regardless of how much energy you use) and a unit rate (a price per unit of gas and electricity used). The price of both of these factors is fixed throughout the length of your deal. They won’t change.

But your total bill depends on the amount of gas and electricity you use. The more energy you use, the more units you use, the more you’ll have to pay for.

How do direct debits work?

More than 50% of energy customers pay their bills by direct debit. This is usually the cheapest way to pay, and involves your energy firm taking an equal payment from you every month.

But of course, you aren’t using the same amount of energy every month. In the winter you’ll use a lot more gas by having your heating on, while in the summer you’ll probably use less. The idea of a fixed direct debit is that your costs will even out across the year.

There are benefits to this system. For one thing, it’s simpler, and you’re less likely to face huge bills in the winter. However, it can make it difficult to keep up with exactly how much energy you’re using and whether you’re paying the right amount.

So why is your fixed deal increasing?

Your direct debit payments can increase even under a fixed deal. This is because, as we explained earlier, your total bill can increase if you’re using more energy. So your direct debit payments may go up if you’re using more gas and electricity, or even if your supplier predicts that you’ll be using more energy. Your initial direct debit agreement may be based on meter reading estimates, especially if you set it up when moving into a new home or if you haven’t sent accurate meter readings for a while. In this case, altering the direct debit is simply correcting an initial estimation.

Even if your initial direct debit was set up based on accurate information, it could still change if you start using significantly more or less energy.

What can you do to reduce the chances of a direct debit increase?

All this information might be making your head spin, but there are some simple measures you can take to make sure your bills are as accurate as possible. For one thing, make the effort to submit regular meter readings to your supplier, so they don’t have to rely on estimations. You can also take steps to cut your daily energy use by only heating the rooms you use, investing in heating controls and dealing with draughts.

If you do receive a direct debit increase which you think is too high, don’t be afraid to challenge it. Call up your supplier and ask them to explain exactly how it has been calculated.

If you’re unhappy with your energy supplier, don’t be afraid to hunt around for a better deal. Here at The Energy Check we compare all prices and tariffs to find the best results for you. Click here to start comparing deals or get in touch by calling 0800 031 48 00.

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