You're conflating fixed rates with fixed direct debit.
You can have a fixed rate with a variable direct debit - the amount you pay per unit will stay the same but you pay for exactly your usage.
You can have a fixed direct debit with a variable rate - the amount you pay per unit will change, but you pay 1/12 of your projected annual usage*
If we ignore the DD discount for a moment and focus on purely unit rates, it doesn't matter how you pay, the amount will be the same, it's just when you pay for it that changes.
* This is the bit most people struggle with. They come to September and see they have a £3-400 balance in their account and think they've been overpaying. They withdraw it and spend it, thinking it's "free money" then get hit with a £3-400 bill in April and complain that they weren't being billed correctly.
Either that or they don't keep track of their usage and then give an inaccurate estimate, resulting in either overpaying or underpaying. Either way it's then apparently the utility company's fault for not having intimate knowledge of the customer's energy usage and being unable to read the future.
No I just misread your response where initially so apologise but I had read it as if you was advising that fixed rate with direct debit was cheaper than variable rate with fixed direct debit and that at moment isn't true because the rates suppliers are quoting are higher than even the expected October figures.
October figures with April known rate and assumed 29% increase October
- Electric Unit Rate = £0.35935
- Electric Standard Charge = £0.61838
- Gas Unit Rate = £0.09495
- Gas Standard Charge = £0.355109
Fixed rates
- Electric Unit Rate = £0.38020
- Electric Standard Charge = £0.47860
- Gas Unit Rate = £0.12270
- Gas Standard Charge = £0.27220
So yeah my point was more that it will be easier for people to sit on variable rate. Work out their 12 months usage cost by doing an April to September calc, do an October to March calc. Add them up, divide it by 12 and set that as your direct debit.
I am willing to bet that anyone that does that their costs come out cheaper to remain on variable for 12 months than what the fixed rate supplies have produced have set too.
Yes the standard charge may be less but that is a fixed known amount and overall a much lower percentage of anyones bill than their unit rate and amount which are significantly higher in the fixed rates being offered.
If they kept the same standard charge as fixed rate but matched what the expected October unit rate is then it would swing the other way by a few £ and be worth fixing.
And what do you think utility companies are doing with all these overpayments? Stuffing them into a bill ol' mattress? No they will be investing it.
So Where's the customers cut of the profit?
That is 100% irrelevant to the individual person though. For one you pay more if you are not on Direct Debit which means being on a you have to either;
- Change your direct debit the day before they take monies from your account. This means to match your usage (assuming you have a smart meter to get that calculation) and go read your meter for number of units used gas wise and convert that to what you pay and then adjust.
- Give the electric and gas reading, let them take the monies from the direct debit and then ask for a refund as soon as possible (this can be done the day after readings are given with Octopus, not sure same with others) and then when it comes to Winter months give reading, see the direct debit payment and pay the shortfall
That honestly for what will be pennies for someone if that at all in terms of interest on any savings you are getting from that extra few hundred quid to be in your account till the winter months is honestly not worth the hassle/effort. Does that mean it adds up to the companies, yeah sure. For instance my difference between paying the variable from April and the fixed till October would be a total saved amount (so over 6 months) is £263.10 for myself.
You will need that £263.10 to then pay towards your shortfall come October. Which means your investment period is 6 months and it needs to be invested in something that
a) guarantees a return
b) doesn't cost to remove the invested amount from the account
c) actually gives any rate of return
d) pays the interest monthly
So you are basically left with only a regular saver or online bank like Chase saver account with around 1.5% interest meaning over that 6 month period you are getting £1.98 in interest. This also assumes that you have the full £263.10 that you are discussing as a saving to get that amount of interest. Unsurprisingly the monthly difference means you are investing more like £43.85 a month then to total up to the £263.10 and then you are utilising that fun once it has maximised to then pay off towards the difference every month.
So actually your interest breakdown is actually
- Month 1 = £0.05
- Month 2 = £0.11
- Month 3 = £0.16
- Month 4 = £0.22
- Month 5 = £0.27
- Month 6 = £0.33
Totalling occurred saving in interest of £1.14 for that period. Now since you have to do the above with your direct debit every month that is up to you if you feel like that amount of account management is worth that saving. Since if you are not on direct debit then you are paying higher rate then you would pay more to be on a pay by usage billing system and would negate any sort of saving for yourself in that period otherwise.
EDIT:
On a side note the obvious answer is to leave the variable rate in place, do your calc to work out the next 6 months of costs approx and set your direct debit under that amount and top it up each month to balance your account. So you get the advantage of the direct debit rates whilst never paying more than you use.
Then do a new calc for October and do the same so it is about £10 under what you expect and then just top up monthly. That way you've got at least a known fixed bill for 6 months at time.
So my figures calculated are:
£192.20 for April to September
£247.94 for October to March
So I would set my direct debit now to £180 and top up each month as needed. Then in October once we know the increase (above assumes the 29% at moment) set that to say £240 and then pay to top each month there. And with the monthly saving of the figure saving of the by paying exactly for the first 6 months to savings I would have about £167 to put towards the increase in October with a total saving £0.77 in interest if did it that way.
