Direct debits to jump 76% in April, So Energy predicts

Customers who pay their energy bills via direct debit face an average 76% cost increase from next month if the government pushes ahead with its plans to increase the Energy Price Guarantee (EPG), So Energy has estimated.

The forecast from So Energy – seen by Utility Week – has been submitted to the Public Accounts Committee’s inquiry into energy bills support.

It comes amid media reports today (3 March) that the government may not press ahead with the planned increase in the EPG from its current level of £2,500 to £3,000.

The reports have circulated after many firms indicated to prepayment meter providers that they would be keeping their rates at the current level. While this is not a definitive indication that the current EPG will be extended it does suggest there is a strong assumption that it could be.

So Energy says the combined support of the £2,500 EPG and the £800 of Energy Bill Support Scheme (EBSS) payments means that direct debits reflect an average yearly cost for customers of £1,700.

However once the EBSS ends, direct debit will have to reflect the EPG level of £3,000, says So.

This would mean a 76% increase in direct debits with the average customer paying around £250 per month instead of £141 currently.

With the total number of people living in fuel poor households due to grow to 8.5 million, the submission says it is clear that many people cannot afford such a dramatic increase in energy bills. It warns that doing so will lead to increases in debt and a worsening of the current economic situation.

Plunging wholesale gas prices mean the cost to the government of maintaining the existing level of the EPG will be significantly lower than the Treasury forecast when it decided to increase it in last year’s Autumn Statement.

So urges the government to extend the EPG at the current rate for the next 12 months or until bills fall below £2,500,

However the submission says that any decision to back-track on the EPG level should be taken at the very latest in early March.

This is because, says So, suppliers will be calculating new direct debit levels this month meaning that announcing a new level in mid to late March, such as in the Budget on 15 March, is simply not feasible if it is to take effect from 1 April.

If this does not happen, there is a substantial risk that many customers will already have elected to cancel their direct debits, warns So.

It would also be extremely labour intensive for suppliers to recalculate direct debits after the Budget and send out communications, having already gone through this process earlier in the month.

So says it is also essential for departments to carry out work to improve data matching so that future support schemes can better support those who need it most ahead of any introduction of a social tariff when the EPG ends next year.