What's the cheapest way to pay - its not straightforward!

  • meldrewreborn's Avatar
    Level 91
    Although we still do not know the reductions to be applied under the EPG from April we do know what the OFGEM price cap figures are, and the EPG will be applied as a reduction to the unit rates derived from the OFGEM price caps. Therefore the EPG reduction cannot invalidate what follows.
    In this letter:
    OFGEM sets out the regional price caps for Direct Debit, Prepayment and payment on receipt of bill for both electricity and gas.

    As you know I often point out that payment by direct debit is the cheapest way to pay, and with E.On Next there are two versions – fixed monthly Direct Debit and Automatic payment of bills after they are raised. I’ve pointed out how this second option is £200 cheaper per year for the average dual fuel customer over payment by cash/cheque/bank transfer. I’ve also pointed out that prepayment is also more expensive than Direct Debit for the average dual fuel customer, although the differential is much lower.

    There is though, a wrinkle in all this. Not all customers are dual fuel. So what is the case if you are just an electricity consumer? Well, based on the tables at the end of the letter, Prepayment comes out the cheapest way to pay, followed by Direct Debit and payment on receipt of bill is by far the most expensive. That was a bit of a surprise to me, but it reinforces the old phrase “the devil is in the detail”.

    And when you look further, electricity prepayment customers pay more than direct debit customers for their standing charges, but less on their unit rates so that eventually “average" users pay less overall.
    Current Eon Next and EDF customer, ex Zog and Symbio. Don't think dual fuel saves money and don't like smart meters. Chronologically Gifted. If I offend let me know by private message, but I’ll continue to express my opinions nonetheless.
  • 3 Replies

  • JoeSoap's Avatar
    Level 91

    Thanks for this. It can certainly be complicated to work out what will be the cheapest option. I use comparison sites using my estimated consumption and plump for a smart meter, dual fuel, monthly DD tariff. I understand that getting gas from one supplier and electric from another, as you do, can sometimes work out cheaper than dual fuel but I don't take things that far. I also consider other things, like customer rating and size of company when making my choice. Reducing my annual consumption by over 20% was a good way to pay less too.
    I'm an Eon Next dual fuel customer with no particular expertise but have some time on my hands that I am using to try and help out a bit.
  • Mari's Avatar
    Level 1
    [QUOTE meldrewreborn] "And when you look further, electricity prepayment customers pay more than direct debit customers for their standing charges, but less on their unit rates so that eventually “average" users pay less overall."

    Thanks meldrewreborn. My dad has a prepayment meter because he wants to pay what he uses. I wasn't aware of this and thought both the standing charges AND unit rates were more expensive on prepayment meters! That will hopefully change soon, with the government saying the 'prepayment penalty' will end from 1st July. However, what they might put in it's place remains to be seen and I think there is a limit to which tariffs can be accessed by people with those meters.
  • meldrewreborn's Avatar
    Level 91

    We have no choice but to wait and see. I suspect that pre payment and Direct tariffs will be merged - its the simplest way and fairest - there will be no strange cases omitted that way. All OFGEM need to do is tweak their models to apportion pre payment specific charges in the two remaining tariffs - DD or not DD, that is likely to be the future question for Eon next customers. Other suppliers might be different..