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Thinking ahead: how to budget for winter fuel bills

Wednesday, 26 August 20206 minute read
Energy Industry

Pure Planet adjusts your monthly Direct Debit payments seasonally, reflecting lower energy use in summer and higher in winter. Here we explain why, and how it works.

Here’s a question: would you lend money to your local supermarket?

Or would you try to borrow money from your phone company, perhaps?

Or what about letting your favourite High Street store hang onto large chunks of your salary in the expectation that you might buy something there at some point?

You wouldn’t, would you.

Yet, at some point, many people got into the habit of treating their energy firms like saving and lending banks. They pay more cash to their energy supplier than they need to in the months when they are not using so much electricity and gas, and then underpay during the winter months in the hope it all balances out in the end.

Why do this? Why surrender more of your hard earned cash in the summer months? Surely, it is better to hang onto it? Isn’t it better to spend it as you wish, when you want, on whatever you want — yes, it can be saved to help with budgeting for your energy costs a few months later in winter, too. Or would you rather let your utility feather its bank account with your hard-earned money?

You wouldn’t do that with your other bills, so why do it with energy?

At Pure Planet we don’t sit on your cash. We vary the Direct Debit during the year. In the warmer summer months, when typically you use less gas and electricity, the DD payment is lower. And in winter, when the heating and lights are on, the DD is higher.

It means you keep hold of more of your money during summer, to use as you choose — and not deposit it with us. And in winter, your higher payments more accurately reflect your increased energy use. All is fair and square.

Doing the maths

Let’s have a look at an example. To keep the maths simple, let’s say your energy costs work out at £1,200 a year, with Pure Planet your DD would be set at £80 a month during the lighter, warmer months, and £120 a month during the colder, darker winter.

There are several ways to look at this example. Each month, with Pure Planet:

  • You pay £40 less in summer.
  • You pay £40 more in winter.
  • The difference is really only £20 either way, because the flat rate would be £100 otherwise. So it’s not that big a step after all.

The DD amounts change on 1 April and 1 October each year. So, it’s good to keep in mind that the step up to the higher rate is coming the month after next.

If you are a recent Member of Pure Planet and are new to us since April, you’ll recall when you were joining that your seasonally adjusted Direct Debit payments were shown in your switch summary, and once you’d signed up they were confirmed in your welcome pack. You can also see what your DD is going to be from October in your app or online account, under ‘Balance & Payments’. Don’t have the app yet? Download it here.

We think it’s smart, transparent and fair. Sure, at face value, it’s not quite as simple as having one equal DD payment throughout the year; but it’s more efficient for you.

And it does take a little bit more thought for budgeting, perhaps, but in the warmer months you could save the difference in a proper deposit account and earn at least a little interest on the money, too, perhaps.

A fairer way

This method also stops us building up and sitting on people’s cash for a large part of the year — which our industry regulator, Ofgem, doesn’t like any supplier doing. Ofgem publishes some helpful Direct Debit advice here. And the seasonally adjusted method also reduces the risks of bad debts occurring in the winter months. This helps make Pure Planet more efficient and means we can focus on offering competitive tariff rates — not on being a savings and deposit bank.

We do review your DD payments every six months or so, and look at your payment-use profile over a full 12 month period. This makes sure your payments align with your actual usage, and also helps meet the regulator’s requirements not to build up large balances or debts on anyone’s account. If you’re undershooting, it’s likely that both your summer and winter payments will rise. And if you’re overpaying, the opposite, we’ll reduce your summer and winter DD payments. The summer and winter DDs combined is your overall payment schedule.

But, as fair and as straightforward we think this model is, there are some Members who would like us to consider having a flat rate throughout the year. It’s understandable, a simple monthly rate is, for many, easier to budget for. We appreciate that.

And we do consider the idea of offering a 12 month DD rate from time to time. But for now, we think the seasonal rates work for the majority — most people don’t mind it, and actually, we also get some saying they much prefer it, as it reflects more closely their actual use.

Here’s a recent Community thread on the subject. Join in the conversation and let us know what you think.

Need help?

If you’re having trouble making your payments, please do get in touch with us straightaway. Head to ‘Help and Support’ in your app or online account and tap ‘Ask a question’. Let us know you need help with your payments. We can help. Have a look at this thread and follow the links for support. We’re also able to refer you to our charity partners StepChange or Money Advice Trust who, in complete confidence, will be able to help you. Citizens Advice is also available to everyone and offers free guidance on financial issues.

Additional support for vulnerable Members

You could get £140 off your electricity bill for winter 2020 to 2021 under the government’s Warm Home Discount scheme, if you are a qualifying Member. Applications for the 2020 to 2021 scheme will open on in the autumn and is designed to help people who:

The money is not paid to you — it’s a one-off discount on your electricity bill, between September and March.

If you’d like us to let you know when we’re ready for applications, head to ‘Help and Support’ in your app, tap ‘Ask a question’ and type in ‘Warm Home Discount’ to register your interest. You can find more information here.

Thanks for being part of Pure Planet.

Steven
Co-founder