The Direct Debit Nobody Has Checked Since Last Winter

Somewhere in your online banking there is a standing payment to an energy supplier. It was probably set when you moved in, or the last time you switched, or the last time the supplier wrote to you sounding slightly ominous. You have not changed it since. It has changed itself a few times, mind.

Here is the thing worth internalising: that number is not a bill. It is a guess about the future, dressed up as a fact. Your actual bill is consumption multiplied by a rate, plus a standing charge, plus VAT at 5%. The direct debit is somebody's attempt to spread that across twelve months without anyone getting a nasty shock in February.

Sometimes they get it right. Often they do not. And since the price cap now moves every three months rather than twice a year, the guess goes stale faster than it used to.

How the number gets built

Broadly, your supplier takes an estimate of your annual usage in kilowatt hours, multiplies it by the unit rate, adds 365 days of standing charge, adds VAT, then divides by twelve. Then it adjusts for whatever is sitting in your account — a credit balance lowers the monthly figure, a debit pushes it up.

That is the theory. In practice, the usage estimate is often inherited from the last person who lived there, or from a year when you were out at work five days a week and the heating went on in November.

Four reasons it drifts

1. The estimate is based on the wrong household. Two people working from home use a very different amount of gas to a retired couple who keep the thermostat at 17°C, and the property's historic data does not know which one you are.
2. The rates moved. Even if your usage is bang on, a cap change or the end of a fixed deal shifts the unit rate and standing charge underneath you.
3. Your meter readings are estimates. If you have never submitted one, you are being billed on a guess of a guess.
4. The balance was never cleared. A small debit from last spring quietly inflates every payment after it, and nobody mentions it again.

The audit: one bill, one meter reading, ten minutes

You need three things: your latest statement (PDF is fine), today's meter reading, and a calculator.

Step one. Take a photo of your meter, gas and electricity, and submit both readings to your supplier today. That single act makes everything after it more accurate.

Step two. On your statement, find your estimated annual usage in kWh for each fuel. If it is not there, look at the last twelve months of bills and add them up.

Step three. Work out the true annual cost. For each fuel: (annual kWh x unit rate) + (365 x daily standing charge). Add them together, then add 5% VAT. Your statement will show the current rates.

Step four. Compare. Is the true annual cost close to twelve times your direct debit? If your direct debit adds up to substantially more than the real cost, you are lending your supplier money interest-free. If it adds up to less, you are building a debt you will meet in March.

Step five. Look at the balance line. A credit balance going into winter is healthy. A credit balance going into spring that keeps growing is not.

A script you can send

Suppliers respond better to specifics than to vibes. Something like this:

Hello, I would like a direct debit review. My account number is [X]. I submitted meter readings on [date]. My current direct debit is £[X] per month. Based on my latest statement, my estimated annual usage is [X] kWh electricity and [X] kWh gas, at unit rates of [X]p and [X]p and standing charges of [X]p and [X]p per day. That works out at roughly £[X] a year including VAT, or about £[X] a month. Please confirm whether my direct debit is set correctly, and if it is not, please adjust it. I would also like to know my current account balance and how it is projected to look at the end of March.

Keep it in writing if you can. If you ring instead, ask them to note the call and send confirmation.

If the credit balance is getting fat

A reasonable credit going into winter is sensible — most suppliers expect something in the region of a month's payment in reserve. Beyond that, ask for it back. You can request a refund of a credit balance, and if the account is comfortably in credit and your usage does not justify holding it, they should return it. Ask after the winter rather than before it, otherwise you may be asked to build it up again by October.

If the answer is no, ask them to explain the calculation in writing. That usually moves things along.

If you are sliding backwards

Do not cancel the direct debit. That feels like control and is actually the opposite — you will be moved onto a more expensive payment method and the arrears will not go anywhere.

Instead, ask for a review, give them the readings, and ask for a payment plan based on what you can actually afford. Suppliers are expected to consider your ability to pay, and there are free sources of help — Citizens Advice, StepChange, and the supplier's own Priority Services Register if anyone in the household is vulnerable or on medical equipment.

Also check whether you qualify for the Warm Home Discount and whether your supplier has any hardship fund open. It is not glamorous money, but it is money.

If you cannot get anywhere, make a formal complaint. After eight weeks, or sooner if they issue a deadlock letter, you can take it to the Energy Ombudsman free of charge.

Building a winter buffer without switching

You do not need to change supplier to smooth out the cold months. Three options that work:

• Overpay slightly from April to September, when usage is low, so the winter months are already paid for. Set the direct debit a little above need in summer rather than letting a credit pile up by accident.
• Run a separate pot. Keep the direct debit at the realistic annual average and move the summer surplus into a savings account yourself. You keep the interest and the control.
• Fix your usage, not your payment. A draught excluder and a cylinder jacket cost less than a winter of overpaying on a badly insulated house.

The short version

Read your meter. Submit the reading. Multiply usage by rates, add standing charges, add 5% VAT. Compare with twelve months of direct debits. Email the supplier with the numbers. Ask for the balance projection to March.

Ten minutes now is a lot less painful than a February statement you were not expecting.