DAN HYDE: Come on energy firms... is it too much to ask to just give us all our cash back

If you put one thing on your to-do list this week, make it a call to your energy supplier.

Most of us have been lured into paying our gas and electricity bills by monthly direct debit.

Typically, there is a discount of around 7 per cent if you allow the company to lift money directly from your bank account.

Suppliers love how this creates a dependable flow of money into their coffers and their call centre staff can get quite pushy about you paying this way.

Double standards: Energy firms are quick to set debt collectors on you, but painstakingly slow to issue refunds


Splitting the payments into 12 chunks over the course of the year also helps customers. I find it easier to draw up a budget when I know exactly how much I'll pay for energy each month. 

If I'm honest, it also serves as an insurance policy against failing to pay a bill on time and staining my credit file.

It is worth bearing in mind, however, that there are serious drawbacks to direct debits — you are effectively signing a contract that puts a lot of financial muscle in your energy supplier's hands.

The direct debit's biggest selling point, being able to sign on the dotted line and file energy bills to the back of your mind, is actually a double-edged sword.

It is too easy to forget that the estimated amount is only a vague reflection of your true bill at a single point in time. In fact, the amount of energy you use and the prices you are charged per kilowatt hour can vary wildly, year to year.

Think of families who upgrade a boiler, switch to energy-saving lightbulbs or have children move out; their usage plummets but the rigid direct debit system means their monthly bills remain unchanged.

The weather also plays a role. Most households are now in credit by up to £400 after a warmer-than-expected winter.

By the same token, those who fall sick and spend long periods at home with the heating and television on tend to use more power. The last thing they need on the recovery trail is to find they've amassed a hefty debt.

Fail to keep track and matters can quickly spiral out of control. Every week, without fail, our postbag at Money Mail is stuffed with complaints about the power giants. 

The trouble is that energy firms are quick to set debt collectors on you, but painstakingly slow to issue refunds.

Unless you explicitly demand the money back, they will sit on it as long as possible. The slush fund helps them to manage swings in wholesale gas and electricity costs so they are loath to let it drain away. 

Wildly inaccurate bills weren't such a problem when energy companies sent out meter-readers more regularly. Now you're lucky to see one in a blue moon.

One solution put forward by small supplier Ovo Energy last year was to pay interest on any credit balances. 

By my calculations, if every household was paid just 1 per cent interest on the £1 billion cash pile energy giants collected this winter households would get a £10 million windfall.

The Government's answer is the 'smart' energy meter. If suppliers can see exactly how much you are using and when, these issues fade away, but I'm deeply uncomfortable about big companies getting hold of sensitive data about our daily lives. 

They bleat about 'data protection' but I fear smart meters will leave us badly exposed to exploitation.

There's a much more straightforward answer. Suppliers should invest in better call centres so customers can phone in meter readings without waiting on hold and they should act immediately when we do.

First, our direct debits should be adjusted while we're on the phone. Second, customers who want refunds should have the credit transferred to their bank account that day. 

There's no reason this can't be done in an age of super-fast digital payments. Finally, every supplier should offer a bonus for ringing in meter readings every month.

A sweetener of, say, 5 per cent off your bill would help the company with its cash flow and send a powerful message about the importance of keeping on top of bills.








Late learner

On an almost empty tube train last weekend I overheard a father explaining to his son how a credit card works.

The gist of it was: 'If you don't pay it off, the interest starts to build up and you'll face all these other fees which really sting you.'

Great, I thought, let's get that message out far and wide. But my enthusiasm dimmed somewhat when I glanced over and saw his son probably aged 18 or 19. That is far too late to be finding out how debt works — and it's not really his father's fault.

The latest figures show debt is ballooning again in Britain. It seems we are already forgetting the lessons we should have learned in the financial crisis: spend only according to your means.

It's high time the Government legislated for some proper financial education. If we're ever to fix this country's debt addiction, our young must be taught how the money world works as part of basic maths in the National Curriculum.

Tapered tax

Many thanks for the fascinating emails and letters in response to last week's column about David Cameron's tax affairs.

A few readers asked for extra detail on the inheritance tax rates payable if you die within seven years of making a gift (it's tax-free after that). I'm happy to oblige. 

The rate is 40 per cent if you die within three years. If you live three to four, it's 32 per cent, then 24 per cent if you live four to five years and 16 per cent between five and six. It's 8 per cent if you live between six and seven years then it disappears. 



DAN HYDE: Come on energy firms... just give us all our cash back

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