Energy customers who pay on receipt of a quarterly bill pay face energy bills £87 higher, on average, than those who pay monthly via direct debit.
While many of us have switched to direct debits, to streamline payment of our energy bills, a cohort continue to pay the traditional way.
They receive a quarterly bill for the energy they have consumed, based on meter readings, not monthly estimated bills. They then customers have the option of making card payments online or by phone, although many will opt to pay by cash, at a Post Office counter, or by cheque, at a bank or through the post.
But increasingly, they’re being penalised for doing so.
Customers who pay on receipt of bills face energy bills up £93 higher—from Utility Warehouse—than those who have set up a direct debit, according to data collected by auto-switching service Migrate.
All Big Six suppliers—British Gas, EDF Energy, E.ON, Npower, Scottish Power, and SSE—charged cash or cheque customers £86 more a year.
And all but one of the 26 energy companies surveyed penalised these customers by more than £84 a year.
The outlier was GnERGY, which hiked the bills of customers paying on receipt by just £40. GnERGY has been troubled, however. The small supplier was slapped with a final order from Ofgem in October, after failing to make a payment of more than £673,000 into the regulator’s green energy fund.
Most customers still paying on receipt of bills are older people on tight budgets, who want to receive accurate bills of their usage, rather than estimated monthly bills, and are accustomed to paying via cheque or cash.
George Chalmers, chief executive of Migrate, said: “Although many of us have embraced the convenience of paying by direct debit, there'll always be people who prefer to do things the old-fashioned way.
“However, with suppliers charging an average of £87 a year to pay on receipt of bill, it's a luxury that few people on a fixed income can afford.’"
Energy suppliers used to offer these customers discounts for timely payment of their bills, however these ‘prompt payment' discounts were discontinued in 2013, following Ofgem’s reforms of the energy market.
Chalmers raised concerns that these customers, who are among the least engaged in the energy market, are being ripped off. With many older people not using the internet—ONS statistics put the number of internet holdouts over the age of 75 at 2.6 million in 2018—the customers who could benefit the most from switching energy tariff and by paying by direct debit are those who are least likely to do so.
Chalmers said: “It's become abundantly clear that consumers can't rely on the price cap to protect them against rising energy bills and the only way to ensure that they're getting a good deal is to vote with their feet and migrate supplier.
“However, with limited access to the internet, those who could stand to benefit the most from doing so also face the biggest barrier to switching.”
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