Around 1.7m households plan to cancel their energy direct debit bill payments from October if the new energy price cap comes into force, according to a survey.
The new prime minister Liz Truss is widely expected in the next few days to unveil plans to freeze energy bills in a tax-funded scheme, following growing concerns that the crisis could see people die this winter.
According to a survey by Opinium Research of 2,000 adults, around 6% of people plan to stop paying their energy bills in October if no action is taken to stop costs increasing further, which amounts to around 1.7 million homes. Around half of those surveyed say they have been motivated to cancel their direct debits by the Don’t Pay UK campaign, which was set up to encourage people to cancel their payments if the government fails to stop the huge rises.
Under current plans, October 1 is the date when the new energy price cap comes into effect and prices for the average household on a default tariff jump from £1,791 to around £3,549 a year. The cap is predicted to rise again in January to around £5,387, according to analysts Cornwall Insight. However, the amount you pay depends on your usage and the size of your home. Read more in our article What is the energy price cap?
Household finances are coming under enormous pressure from the cost of living crisis, with soaring energy bills expected to push millions into fuel poverty this winter. With so many people extremely worried about how they’ll pay their bills, it’s little surprise that calls on people to cancel their direct debit payments from campaign groups such as Don’t Pay UK are gaining traction.
According to Don’t Pay UK, which is run by anonymous activists, around 133,853 people have so far signed up to the campaign. It estimates that if one million people stopped paying their energy direct debits, this would amount to a loss of around £1.4 billion for providers, on average. If 1.7 million households stopped paying, this loss soars to £2.38 billion.
However, the consequences of cancelling your direct debit could be serious, as your credit record may be damaged, which could impact your chances of taking out a mortgage or credit card in the future. Other risks include being switched to a more expensive prepayment meter, being chased by debt collectors, and ultimately receiving a County Court Judgment (CCJ) against your name. Read more in our article 7 reasons why you shouldn’t stop paying your energy bills.
If millions of consumers stop paying their energy bills this could also cause wider problems and further rises, the government has warned. It says non-payment could make the energy crisis worse, and cause more suffering for UK households struggling to make ends meet. “High wholesale gas prices have led to 29 energy suppliers exiting the market since last summer,” said a spokesman for the Department for Business, Energy and Industrial Strategy (BEIS). “Encouraging people to refuse to pay bills could lead to more failures, exacerbating costs for households in the longer term.”
Akansha Nath, from Credit Karma, the multinational credit reference service, which commissioned the Opinium survey, said: “The rising cost of living has felt relentless for many households over the last year and the expected changes to energy tariffs in October are understandably making many people feel anxious about their financial future.
“But it’s important for consumers to remember this can have longer-term consequences on their financial stability. If you’re worried about making repayments, explore all the available help open to you, from government support, to repayment extensions from your provider.”
However, people are understandably desperately worried about how they will afford the energy bill increases. The Opinium survey found that around half of householders don’t know how they will be able to afford the new price cap, and one in 10 know they won’t be able to afford it. Around three in 10 say they will cut back on how they spend such as food, and one in ten would take on extra work to make ends meet. One in 20 plan to borrow more money to pay bills, and one in five are worried that they wouldn’t be able to stay in their home if bills continue to soar.
If you’re considering switching your energy provider, it’s worth doing plenty of research so you can be certain you’ve found the best possible deal to suit your needs. Comparison websites such as MoneySuperMarket, Uswitch and Compare the Market enable you to compare the latest energy tariffs, whether you’re looking for a fixed or variable deal.
What to do if you can’t pay your bills
If you’re struggling to pay your energy bills, your first step should be to contact your supplier and ask for help. It should offer a payment plan that works for you, and considers how much you can truly afford to repay. This could mean being moved onto a specific repayment plan, paying extra money every month or being moved to a prepayment meter. You can also find tips on how to reduce your energy usage in our article Energy saving tips: how to reduce your bills and 11 practical tips to keep warm and save energy this winter.
Suppliers also have financial hardship funds and grants that they may be able to offer you, depending on your circumstances, if you’re in energy debt. Read more in our article Is your energy supplier offering grants to pay off energy debts?
You could also speak to a charity such as Citizens Advice, StepChange or Turn2us. The criteria for energy supplier’s grants will usually insist that you have first sought and received help from money advice services such as these charities.