Hit hard by soaring energy costs UK consumers in their droves have begun cancelling gas and electricity account direct debits, warns services comparison and switching specialist uSwitch.com.
Sparking the exodus was last year’s 42 percent increase in energy prices which added on average £381 ($625) to consumers’ annual energy bills. However, almost a third of households only had their direct debits increased in the first quarter of 2009 leaving them playing catch up to make up for months of under paying. Many felt forced to cancel direct debits as a result, noted uSwitch.
According to the Office of Gas & Electricity Markets, the power supply regulator, some 40 percent of households pay energy bills by direct debit.
However, based on data for the last quarter of 2008 and the first and third quarters of 2009, uSwitch reports a 7.3 percent fall in the number of households paying via direct debit with the number paying by cheque or cash up 72 percent compared with 2008, from 275,400 to 474,300. Other more costly options than direct debit such as prepaid meters have also seen a surge in adoption by households.
Also indicating a trend away from direct debit, only 85.3 percent of households choosing an alternative form of payment are opting for direct debit compared with 92 percent a year ago. uSwitch estimates this could mean that households opting for direct debit could fall from 4.7 million in 2008 to 4.4 million in 2009.
The swing away from direct debit comes at a high cost, with uSwitch calculating that cash or cheque customers are paying £98 a year more on average for their energy than direct debit customers. Direct debit customers who access energy suppliers’ cheapest plans which are available via the internet enjoy even higher annual savings of £214 on average compared with cheque and cash payers.
The average annual household energy bill for a standard direct debit household is £1,141 while for an online direct debit household the average is £1,025, according to uSwitch.
Overall uSwitch estimates that if the current trend in the use of direct debit payments for energy bills continues UK households stand to loose discounts totalling £33.5 million annually as a result.