This information is correct at the time of publishing (11 August 2022)
All the information in the press and online is suggesting that energy bills are set to increase sharply in October, and then again in January, when the price cap (the maximum amount per unit that energy companies can charge their customers on variable rate contracts) goes up. The price cap can now change every three months. This will make energy bills unaffordable for many as we go into winter. Some of the recent articles here, here and here have suggested it will go up by at least 70% in October.
In response, a campaign Don’t Pay UK has been started encouraging people to cancel their direct debits to send a strong message to energy companies to bring down their prices. Not paying energy bills carries significant risks and no one should take this action without being fully aware of the potential consequences.
Impact on your credit rating
If you go into debt, it could negatively affect your credit rating, meaning you might find it more difficult or expensive to borrow money (such as for a mortgage or loan) in the future. To find out more about your credit rating you can read here.
If you cancel your direct debit you risk the energy company disconnecting you. They may install a prepayment meter (see below) as an alternative. For many customers your energy contract will state that you must pay by direct debit. Breaching the contract with the energy company could mean that they terminate your energy contract leaving you without a supply. You may then find it hard to find a new supplier willing to take you on as a customer in the current environment.
Being put on a pre-payment meter
By cancelling your direct debit, you risk being put on a pre-payment energy meter which will result in higher bills. There is a charge for installing a pre-payment meter which the energy company could pass on to you including up to £150 for the warrant to force entry. Once the pre-payment meter is fitted the energy company will deduct a regular sum from the meter either weekly or every time you top up. There is also the risk of being disconnected from supply completely if, when the energy company enters your home to install a pre-payment meter, they discover that for some reason your property is not suitable for one – such as old or unsafe pipework. Getting reconnected after total disconnection normally comes with a high cost.
Once a pre-payment meter is fitted there is the risk of self-disconnection. This is where you cannot afford to top up the meter and as a result end up without a gas or electric supply.
Vulnerability commitment on disconnection
Eleven suppliers have signed up to the vulnerability commitment which means, amongst other things, they have pledged that they will ‘never knowingly disconnect a vulnerable customer at any time of year, where the household has children under the age of 6 (or under the age of 16 during the Winter Moratorium) or where for reasons of age, health, disability or severe financial insecurity, that customer is unable to safeguard their personal welfare or the personal welfare of other members of the household.” Is your supplier one of these eleven? If not then if you think you meet the criteria, you may wish to switch to one who is.
If you use energy that you do not pay for, then in certain situations the energy company could pursue a prosecution against you for theft. You could therefore run the risk of being convicted and having a criminal record.
If you remain in debt for any period of time, the energy company could pass the debt on to a debt collection agency or apply for a County Court Judgment against you. This will stay on your credit report for six years and could lead to further enforcement action if you do not pay the debt off, such as bailiffs or, if you are a property owner, the debt being secured on your property by way of a Charging Order.
For the reasons set out above, we do not recommend taking this action unless you are fully aware of the consequences and are able to save the money in order to repay your bill immediately when needed.
If you are struggling to pay your bills you can contact our Money Advice Team here to get some advice from one of our advisers.
How to switch your supplier
You can switch your supplier if you pay by bill and any debt you owe is not more than £200. If you do switch supplier the debt will not travel with you to the new supplier and you will still owe it to your old supplier. OFGEM, the Office of Gas and Electric Management, has a Confidence Code that switching sites can sign up to meaning that they are accredited by OFGEM to give you impartial advice on the best deals available for the area you live in.
You may also want to check the performance of the supplier. You can do this by looking at the ratings provided by the Citizens Advice Customer Service Ratings website.
If you already have a pre-payment meter
If you already have a pre-payment meter then you can switch suppliers. If you do have a debt which is up to £500 owed and being deducted from the meter then if your company has signed up to the Debt Assignment Protocol you can still switch to a new supplier. The debt will travel with you to the new company and hopefully, if you switched wisely, you will be on a cheaper rate.