Power up vigilance to combat the post-winter bill blues

The standard winter energy bill for the average household has increased 20 per cent in the last year, according to Moneysupermarket.com, and while some tariffs have been reduced, energy prices are on a firm upward trend. That's before factoring in a harsh winter in which many households have had to turn up the heating and worry about the cost later.

Energy firms are already under fire for failing to pass on lower wholesale prices to households, despite minor cuts in recent months. And recent annual results shone the spotlight back on the margins that the big suppliers are enjoying, with British Gas last week reporting record profits. British Gas is the most consistently competitive supplier, yet its latest figures prompted Consumer Focus Scotland to call on all suppliers to cut their bills and for the Competition Commission to investigate the energy market.

But with bills unlikely to be significantly reduced in the short term and the average standard tariff forecast to reach about 2,000 a year within a decade, the onus is on households to do what they can to lower their costs.

The most effective move open to the 40 per cent of households paying standard tariffs on receipt of a regular bill is to switch to a direct debit arrangement, preferably managed online and on a dual-fuel basis. Analysis by Moneysupermarket.com found that households with the average energy consumption and on a standard tariff are paying 1,233 through quarterly bills. By moving to the best available online deal and paying by monthly direct debit, those households could reduce their bills to 927 a year, saving 305.

Direct debit payments also offer protection against massive post-winter bills as they are based on the supplier's calculation of how much a household uses over the course of a year, with the payments broken down into equal monthly instalments.

Direct debit arrangements require vigilance, however, with thousands of complaints over the last year regarding the accuracy of the direct debit payments set by suppliers. Many households have discovered to their cost that their monthly payments bear little relation to their energy usage in a given year.

Scotsman reader Anne Gibbs, a pensioner, was last week shocked to learn that her direct debit payments would be more than doubled following higher winter usage.

"After this exceptionally cold winter, we realised we would have to increase our payments from 37 a month, but the amount they decided we needed to pay was 91 a month, which gave us quite a shock," she explained. "However, when I phoned customer services I got it easily resolved by suggesting we now pay 50 a month, to be reviewed in June."

Complaints from households upset by sharp direct debit increases and other billing problems prompted an Ofgem investigation into the issue last year. It found that while energy companies were not deliberately over-collecting on direct debit payments, there were "significant weaknesses" in direct debit arrangements that caused serious problems for some customers. Ofgem said the problems were caused primarily by a lack of transparency and poor communication, with little clarity over the way in which direct debit payments were calculated.

Marieke Dwarshuis, director of Consumer Focus Scotland, said the Ofgem investigation showed no evidence of energy suppliers systematically over-collecting direct debit payments from customers. "However, the report did show the complete disregard energy companies can have for their customers and the difficulty they can create for people," said Dwarshuis. "The lack of transparency and poor communication by suppliers highlighted in the report must be addressed to ensure fairness for consumers paying by direct debit."

During the first quarter of 2009 the Energy Ombudsman received an average of 500 billing complaints a month, rising to an average of 580 a month later in the year. However the average has dropped slightly following the introduction of new Ofgem guidelines in January, with signs that suppliers have improved their handling and resolution processes, said the ombudsman.

Under the new licence conditions, suppliers are obliged to ensure direct debit levels are based on the best available information, including the amount of gas and electricity used; give clear explanations as to why direct debits are set at a certain level; and they must refund any credits that have accumulated, if the customer requests a refund. If companies decide to hold on to the credit, they must explain why.

Households also have rights under the Direct Debit Guarantee, which dictates that suppliers must give at least ten working days advance warning of any changes to direct debits.

Confusion over bills continues, however – Consumer Direct received 3,326 calls or complaints relating to energy billing in February alone, including more than 100 about incorrect direct debit limits.

So the emphasis is firmly on households ensuring the accuracy of direct debit payments by regularly checking their gas and electricity meters regularly. The readings can also be a guide for suppliers to revise the monthly payment level. If your bills are based on estimated usage, always check the estimate against your meter readings and tell your supplier of the updated reading if the figures differ. Suppliers have eight weeks in which to seek a resolution to complaints, after which you can take your complaint to the Energy Ombudsman if you do not hear anything or are dissatisfied with the response.

HOW TO REDUCE YOUR ENERGY BILLS

Switch – If you're on a standard tariff you could save hundreds by moving to a competitive online, direct debit deal. Even if you want to stay on a standard tariff or are unable to take advantage of online or direct debit deals you can still save money by switching as suppliers typically limit their best rates to new customers.

Check your meter – If your gas or electricity bill is based on an estimated reading (indicated by the letter 'E') you should take a meter reading to ensure the accuracy of your bill. If it has been over-estimated, ask your energy supplier for a revised bill. Meter readings supplied by customers are usually indicated by the letter 'C' and readings taken by suppliers are denoted by 'A', meaning actual.

Turn your thermostat down – Reducing your room temperature by just 1C can cut annual heating bills by up to 10 per cent.

Get insulation – Roof and cavity wall insulation is relatively cheap and very effective and a growing number of insulation grants are available for pensioners and low income households. Cavity wall insulation, costing about 500, can be installed for half price with a grant from your energy supplier, while those aged 70 or over can usually have it installed for free. Loft insulation and solid wall insulation grants are also available at savings of 150 and 400 respectively.

Double glaze – This can reduce heat loss by up to 12 per cent, producing an annual saving of about 135 on energy bills.