What’s in this guide?
Did you know that thousands of people across Britain are struggling with their monthly bills?
If this applies to you, there are things that you can do.
Take a look at this guide to find out more about what energy debt is, how your supplier can help you and repayment strategies.
Let’s take a closer look.
What is energy debt?
Energy debt is caused due to falling behind on paying for your energy.
Sometimes this is because of an unexpected bill, increasing energy prices or you could have been ‘backbilled’.
This is where you underpay for your energy for up to 12 months, and your energy supplier can slap you with a bill for potentially thousands of pounds.
Regardless of the reason, there might be no need to worry.
Energy suppliers have to help you repay your debts.
Keep reading for ways that your supplier can help you.
What about my energy company?
Your energy companies have to help you to come up with a plan that will help you manage your repayments. They have to do the following:
- They need to let you know how you can pay back the money
- Then, they need to offer you a plan which allows you to reasonably pay back that money
This means that they shouldn’t just demand the money without telling you about your options, or not give you a payment plan that is based on realistically what you can afford.
What do I need to do?
Once you have spoken to your energy supplier, this information might be beneficial to work out what you can afford.
It can ensure that you take control over your debt, and won’t get overwhelmed when you need to take a look at your finances over this period.
- Make a list of your income
- Make a list of your spending
- Add large outgoing payments like your mortgage
Depending on what you can afford, you may need to make payments every month, or every week, or even fortnightly.
How it works, is that a part of your money that you pay every month (or week etc.) will go towards paying off your debt, and the rest goes towards your electricity or gas.
This means that you will always have power and you won’t have unexpected large bills that might be impossible to pay.
One of the strategies that could be used is a prepayment meter, so let’s take a look and see what prepayments are and how they could be repaid.
While with a standard credit meter you pay for your energy, typically monthly, after you have used it while a prepayment meter as the name suggests means that you pay for your power before you use it.
This can range from paying for a week in advance or a month depending on your preferences, and if you are using a prepayment meter to pay off debt, an agreed upon amount will be removed to help pay that debt off.
To do this, you can usually purchase a card or a key fob from your local Paypoint, Payzone or Post Office®, which you would then insert into your prepayment meter.
Prepayment meters are usually in low-income households that might fail to pass a credit check needed to be able to pay for your energy monthly.
Unfortunately, prepayment meters are often actually more expensive when it comes to the cost of your energy per unit, and the cheapest prepayment tariff is far more costly than the cheapest fixed rate tariff.
A top up of £10 would only last four days, assuming that you use the average of around £2.44 a day.
But, they could be the best way of paying off your energy debt.
Warm home discount
The warm home discount replaced ‘social energy tariffs’ which were for the most vulnerable, elderly or on a low income.
This is a payment of £140 to help people that may struggle with paying their energy bills.
It is a compulsory scheme for the larger energy companies; it is an annual credit they put in the account of people who are eligible. Energy suppliers with over 250,000 customers legally have to offer this discount.
Some independent suppliers also offer it, but unlike the bigger companies, it isn’t mandatory for them to provide it to their customers.
During the winter, some customers can benefit from the £140 discount, but you should also ensure that you are on the best energy deal for you and your home.
In a worst case situation, your supplier will disconnect your power.
They have to send you a notice, which is around a month after they send you a bill before your energy is cut off, you then get two weeks to prepare.
They also have to give you at least seven days written notice first.
If you fall within any of these categories you may get extra help:
- Pensionable age
- Have severe financial problems
- A disability
Can I still switch?
The truth is, even if you are in debt not only can you still switch, but you should check the market regularly to see if you could get a better deal elsewhere.
After all, if you did go into debt because of an increased price of a tariff, you may run the risk of going deeper into debt or having this problem again.
According to many suppliers, as long as your debt it under £500 you should be able to switch to most energy companies.
Did you know that you could be saving up to £500 on your energy bills every year?