Signing up to an annual direct debit payment plan from your energy supplier is supposed to help prevent bill shock as your payments are spread equally throughout the year. But it might not work like that...
Winter energy bills rise for new OVO customers
Winter energy bills rise for new OVO customers
New customers to OVO Energy will see a rise in their direct debits throughout the winter to cover these more expensive months.
As customers are joining the energy company at the most expensive time of the year, they won’t have had a chance to build up credit to pay for these increased costs over winter.
Once the weather gets warmer and energy usage goes down, OVO says the bills will also fall, but this won't happen until next year.
The OVO deal is a fixed-rate tariff so the overall price per unit of energy won’t change, but as you’ll use more energy over winter you’ll initially be paying out more.
The average customer uses 25% more gas and electricity in winter and so these higher direct debits act as a buffer to cover payments to make sure a huge bill doesn’t build up by the spring.
If you’ve paid too much over the winter, your direct debits will go down to meet this overpayment. And they’ll go down slightly anyway as you won’t be using as much energy over the summer months.
There’s also the added bonus that you’ll get paid 3% on any in-credit balance you hold which means you’re not just giving this extra credit to the energy company as a free loan because you’ll get a competitive return on it.
What’s the problem?
Although I know prices go up over the winter and I can see the logic behind OVO pushing bills up to meet this need, it seems rather pre-emptive. And you could end up paying far more than you need to during the winter months.
If OVO estimates the amount you’re going to use over winter, at an already higher rate to meet rising costs, this could be far more than the amount you actually use and the price won’t be re-evaluated until the spring.
What would be better is if the company uses a set rate throughout the entire year, so you know exactly how much you're paying out. As it's a fixed deal anyway this would make more sense.
How can I make sure I’m not paying too much?
Paying by direct debit is generally cheaper and energy providers will often give you discounts if you pay this way.
However, many energy providers are guilty of over-charging customers by upping their direct debit payments as an easy way to borrow free money.
This is why it’s important you make sure your monthly payments are set at the right level. The best way to keep a check on how much you’re paying is to take things into your own hands and make sure you are conducting regular meter checks and giving these to your provider.
Am I on the best tariff?
With all the recent talk about predicted hikes in energy bills after the shock announcement from SSE to raise its prices, many people have switched to fixed-rate tariffs. Our comparison tables give a complete look at the market, but here are the cheapest deals currently available.
Cheapest energy tariffs on the market
iSave v12, variable
Fixed for three months, paper bill available for £1 per month. Cancellation penalty of £30 for fuel in the first three months, no penalty thereafter.
Energy online, fixed until Jan 2014
Rates guaranteed to be at least 3% cheaper than npower standard until 31st Jan 2014. There is a £30 per fuel cancellation penalty if you leave this tariff before 31st Jan 2013
iSave fixed v4
Prices fixed until 31 March 2014. Paper bills available for £1 pm extra. There is a £30 per fuel cancellation penalty if you leave this tariff before 31 March 2014.
New energy fixed
Prices fixed for 12 months, there is a cancellation penalty of £30 for gas and £30 for electricity.
Online variable November 2013
6% discount against their Clear & Simple prices until 30th Nov 2013. £30 per fuel cancellation penalty if you leave this tariff before the contract end date of 30/11/2013.
Online January 2014
6% discount against Clear & Simple prices until 31st January 2014.
There is a £30 per fuel cancellation penalty if you leave this tariff before the contract end date of 31/01/2014.
3% discount against standard prices for 12 months. There is a cancellation fee of £10 if you switch away before the end of the guarantee period.
Public price freeze till 2013. No cancellation penalties.
* based on average dual fuel tariff costing £1,310 (Source: OFGEM 1 Aug 2012)
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