Keep on top of bills, stay out of debt

29 September 2008

Energy bills are rising at an unprecedented rate. Only recently have a number of utility companies put their bills up by around 30%, and it’s not likely to stop anytime soon: a report by the National Housing Federation suggested that average household electricity bills are expected to increase to more than £500 per year by 2010, and gas bills to around £900 – a total of approximately £116 per month.

With that in mind, it’s essential that you keep on top of your bills. Evidence suggests that energy companies are putting their prices up as frequently as every few months, so it makes sense to ensure you are paying exactly what you owe every month, instead of letting your costs build up.

Check your meters
Energy customers may be putting themselves at risk by not checking their meters frequently. It may sound like a small thing, but by making sure you are paying for only what you use, you could save a lot of money in the long run, and avoid running into debt to make ‘catch-up payments’.

You’re most at risk if you pay your energy bills by direct debit. When you sign up for a direct debit with your energy company, they will usually set fixed monthly payments for your gas and electricity. These payments will be an average based on previous usage, meaning your payments should more or less tally up with the actual cost of the energy you’re using.

There are two big problems with this:

• Energy costs are always rising – so a fixed monthly direct debit payment may soon fall short of what you actually owe. If you keep your payments the same for a year, the chances are you will have fallen behind.
• What if the direct debit payments are wrong from the start? If you move into a new home, for example, it’s very difficult to estimate your energy usage, so the amount you pay on direct debit might not be enough.

A spokesperson for Gregory Pennington said: “Billpayers can come in for a shock when they receive a letter from their energy company demanding large amounts of money, which they often will not realise they owed.

“Most energy bills do tell you if you’re in ‘arrears’ on your account – which means your direct debit payments are no longer covering the actual cost of the energy you’ve used – but having both the direct debit payment and the actual cost printed on the same bill can be confusing for some people.

“If your bills are estimated, you run the additional risk that your actual usage may be even higher – although, similarly, your meter reading may be lower than estimated, in which case you will be in credit on your account. The best practice is to check your meters regularly and update your energy provider on a regular basis to ensure you are paying the correct amount.”

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