Energy direct debits – everything you need to know

Woman paying her energy by direct debit

Most people pay their energy bills via direct debit. But how is this calculated, how often are direct debits reviewed, and what happens if your payments are too high? Find out how to get a refund if you’ve built up too much credit, and how to lower your direct debit payments.

Is your energy direct debit higher than you think it should be? If you think your energy supplier is charging too much for your bills, it’s good to know what your rights are.

If you think you’re being charged unfairly, here’s everything you need to know if you pay your energy bill by direct debit.

If you’re unhappy with your supplier and are thinking of switching, doing an energy comparison could find the best deals for you.

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How are my energy bills calculated when paying by direct debit?

When it comes to calculating your bill, your energy supplier will estimate your annual usage, and work out the cost based on your current tariff. Then the sum of your annual payment is broken down into 12 equal monthly payments. These are your fixed monthly direct debits.

If you find your bill confusing, check out how to read your energy bill.

The reason your bill’s calculated this way – rather than a pay as you go system – is to keep your monthly payments consistent. By spreading the cost, customers tend to build up credit in the warmer summer months, then use this credit up over the winter.

As such, you’re likely to be in the most credit coming into winter, in October. Then, if the supplier’s calculations are accurate, your balance should be about zero in April/May.

While this is a good system for household budgeting, its main drawback is that if the company overestimates your usage, you could end up overpaying. Likewise if it underestimates your usage, you could end up in energy debt. We’ll come back to this in a moment.

Ever wondered exactly what contributes to your energy costs? This is what makes up your energy bill.

Is direct debit a good way to pay?

Generally speaking, direct debit is a safe and simple way to pay. It means your bills are paid on time, so you avoid the risk of late payment charges. And if you pay by direct debit, then you could save around 7% on your bills. Energy companies incentivise this type of payment as they prefer customers to pay this way.

But it’s a good idea to check them regularly to ensure the payments are accurate and fair.

Your key direct debit rights

Paying by direct debit also confers you certain rights. According to energy regulator Ofgem’s Gas Supply Licence (condition 27):

  • Direct debits must be fair. Suppliers should set payments according to the best information available.

  • All information should be clearly explained. This includes why your supplier has set your direct debit at the level it has, and the reasons for any changes.

Credits must be refunded on request. This includes any overpayments made on your energy account. However, your supplier may decline your request, giving clear reasons for doing so.

Fixed vs variable direct debits

It’s worth noting that not all direct debits are fixed, and it is possible to make a variable payment. Not all suppliers offer this, but for those which do, you’ll need either a working smart meter or to submit a monthly meter reading.

The advantage of paying by variable monthly direct debits is that you’re only paying for what you use, so billing is guaranteed to be accurate.

The main downside is that it might impact your cashflow during the winter months, as your bills will be significantly higher than in the summer. As such, it’s worth thinking about whether you can take the financial hit over winter before committing to this kind of payment scheme.

Can a company change my direct debit?

A company is able to change the amount, frequency or date of your direct debit. However, thanks to the direct debit guarantee, it must notify you in advance of any money being debited from your account. This is normally 10 working days to a month before the change.

Energy companies do this frequently, as bills are usually given as an estimate of the amount of gas and electricity you’ll use in a year. If you use more or less than the estimate, your monthly payment will be altered to reflect that depending on the tariff you’re on.

How often are direct debit payments reviewed?

At the time of writing, most households are on the energy price cap, which changes every three months. However, this doesn’t necessarily mean your bills will go down if the price cap does. Similarly, they may not rise if it goes up. Not all energy companies review customer direct debits when the price of energy changes.

Here’s a firm-by-firm breakdown of when customer direct debit payments are reviewed, and how to change this payment yourself.

Energy supplier How often are direct debits reviewed? How to change your payment
British Gas “Customer direct debits are reassessed periodically at least once a year.” “Customers can always adjust their debit when they check their account online, or they can contact us.”
E.on Next “We review our customers’ direct debit payments each time we bill them to ensure they are paying the right amount so they don’t fall into debt over winter or build up too great a credit.” You can increase your payments or make one-off payments online or by contacting E.on Next. If you want to reduce payments, you’ll need to get in touch.
EDF “We automatically review all of our customers' direct debits twice a year to ensure they are set at the correct level for customers to pay for the energy they use without the risk of getting into debt or building up too much credit. The dates of these reviews are fixed to when we bill the customer.” “Any customer concerned they may be paying too much or too little should contact us directly or they can adjust monthly payments online. Further details can be found on our website.”
Octopus “We regularly review customers’ direct debits and recommend a decrease if they are building up a credit versus their actual energy use – roughly 600,000 of our customers this year have been advised to reduce their direct debits.” “Our customers are always completely in control of their direct debits and can change it any time in their online account, or by speaking to our team.” Octopus also has a Balance Forecaster which allows customers to see what their account balance will be if they raise or lower their monthly payments.
OVO Energy "Every day in the background, but it will only update your payment every three months (if needed). It may also review and update payments when prices change. You can see your most up to date recommended DD amount in your online account." "You can increase or decrease your payment in your online account, or by contacting OVO. You can decrease your payment up to 10% less than the recommended amount and increase your payment to a max of £10,000/month."
ScottishPower “We monitor direct debit levels continually as standard to ensure payments are spread evenly and take account of expected use or seasonal variations throughout the year.” “Customers can manage their direct debit levels directly through our Direct Debit Manager tool, part of an online account.”
Shell Energy “We reassess every three months and also when Ofgem announces a price cap change. If it needs adjusting, we contact customers in advance to let them know.” You can increase or decrease your payment in your online account.
So Energy So Energy “We review at least twice a year and when prices change significantly (customers will be notified before a review and asked to submit a meter reading). We will additionally review if usage falls out of tolerance of the current Direct Debit.” You can increase or decrease your payment in your online account.

What happens if I’m overpaying on my account?

While it’s good to have some credit in preparation for winter, you could be paying too much. According to Ofgem figures in 2023, UK energy firms were sitting on a combined £8.1bn of customer overpayments.

It is possible to request refunds from energy suppliers. Most will allow you to decrease your monthly payments in your online account, and some will let you request a lump-sum refund. If your account’s credit seems too much, it may be wiser to move the money to an account where it’s at least earning interest.

As a rule of thumb, as we come out of the summer, it’s a good idea to have enough credit to cover around two months of payments. This provides a safety net for winter, when our usage goes up.

What can I do if my direct debit is too high?

Energy rates are likely to change every three months to reflect the latest energy price cap. When your direct debit will be changed to reflect that depends on your supplier. But energy direct debits can also change to reflect what your supplier estimates you’ll use.

If you think you’re overpaying, there are a few steps you can take:

  • Keep on top of your meter readings. The best way to ensure accurate billing is to submit frequent meter readings, such as every month. This way, your supplier is less likely to overestimate your usage. If you have a working smart meter, you won’t need to do this.
  • If you’re massively in credit, request a refund. You’re perfectly within your rights to request a refund if there’s a disproportionate amount of credit on your energy account. According to condition 27 of the Gas Supply Licence, direct debits must be fair, and refunds must be issued where the customer requests it. Your supplier can withhold your request for a refund, but it must give a clear reason for doing so.
  • Ask for your direct debit to be lowered. If you find you’re always in credit, you can ask your supplier to lower your monthly direct debit. This is more likely to be successful while your account’s in credit, so make sure any debt is paid off before requesting this.

If your request for a refund or lowered direct debit is unsuccessful, your energy supplier needs to clearly state the reason why. If you’re not happy with this, you can take the matter further by going to the Energy Ombudsman. Alternatively, you can make a formal request in writing. If this is unsuccessful, you can take your business elsewhere by switching energy supplier.

What happens if I’m underpaying on my account?

If you’re falling behind in paying your energy bills, you might end up in energy debt. This could ultimately lead to disconnection, which you absolutely don’t want. If you’re struggling with your gas or electricity payments, find out how to get help with your energy bills. You may be able to negotiate a more manageable payment plan with your supplier, or there may be grants available to help clear your debt if you’re in need.

What happens to any credit if my supplier goes bust?

If your energy supplier goes bust, Ofgem will appoint another supplier to take its place. This means your account will be moved over to that company, and you’ll be put on its standard variable tariff (SVR). Often this may not be the supplier’s most competitive tariff, so it’s worth shopping around to see if it’s best to switch.

If your account with the failed supplier was in credit, the newly appointed supplier will either have to pay this amount to you, or keep your credit balance in place to pay for future energy use.