If you’re struggling to pay your energy bills, you may simply stop paying them, but it’s vital to understand the impact this could have on your finances.
The energy price cap rose to £1,928 in January. Read more in our article What is the energy price cap?
Most households will pay more or less than the cap, as exact bills will depend on the size of your home and energy usage. Analysts Cornwall Insight said that energy prices are unlikely to fall to pre-pandemic levels for the rest of the decade and many are expected to find themselves in ‘fuel stress’, spending more than 10% of their income on fuel alone. Read more about the energy crisis in our article The energy bills crisis: what can you do about soaring costs?
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.
However, cancelling your direct debit and refusing to pay your energy bills could have potentially serious implications, both now and in the future. Here’s a rundown of the risks.
Contents
- Your credit rating may be damaged
- Debt builds up – and fees can rack up too
- You could be switched to a prepayment meter
- You could be chased by debt collectors
- You could receive a county court judgement (CCJ)
- Refusing to pay could cause wider problems
- You could be disconnected (but this is unlikely)
- What can you do if you can’t pay your bills?
1. Your credit rating may be damaged
Missed energy bill payments could be marked as defaults on your credit record, which is used to determine your credit score. Credit scores are important because they affect your chances of taking out any credit in the future, such as a mortgage or credit card. The worse your score is, the less likely you are to be able to borrow money. You could also struggle to rent a property or to get a mobile phone contract if your record appears to show that you cannot keep up with bill repayments.
Lewis Shaw, founder of Mansfield-based Shaw Financial Services, said: “Understandably, consumers want to take a stand against energy suppliers when they appear to be boasting of record profits and bumper payouts to shareholders. The reality is the consequences of that type of action will be dire.
“Non-payment of utilities will show on a credit file, initially as missed payments, then arrears, then defaults after seven months, and ultimately a CCJ. This means paying higher interest not just for a mortgage, if you’re even eligible, but on credit cards, loans and any other type of borrowing for the following six years.”
Read more about how credit scores work in our article Seven steps to improve my credit score.
2. Debt builds up - and fees can rack up too
The majority of households pay their energy bills by direct debit. However, bear in mind that if you pay on receipt of your bill, the amount you owe is supposed to be paid within 28 days of the date printed at the top of the bill. Beware, too, that a typical household that pays their bill when it arrives rather than by direct debit will pay more than the price cap, and more than those on prepayment meters.
When you stop paying, the money you owe builds up on your account, and you could find that your debt racks up as fees are added to your account. For example, British Gas charges £13 to cover the cost of debt collection, and £7 to pass your details onto a debt collection agency. If a representative visits your home to chase the debt, you’ll pay a £39 charge. E:on charges a £10 late payment fee, and a £20 debt collection fee. If your details are passed to a debt collection agency, you’ll face a percentage fee on top of your current debt (E:on charges 31% of your outstanding balance, for example).
Your supplier should contact you to give you notice to pay your bill, and offer a payment plan, but that doesn’t necessarily stop extra changes being applied to your account. Read our article How to take control of your debts for further help.
3. You could be switched to a prepayment meter
If you owe your energy supplier money, it may tell you that it’s moving you to a prepayment meter. Your debt would be added to the meter and an amount deducted from your payments each week until this is repaid. If you’re on a prepayment meter, you pay in advance for the gas or electricity that you use, so you cannot fall further into debt.
However, being moved onto a prepayment meter should be the last resort before disconnecting you. You also cannot have a prepayment meter installed in your property if this isn’t a practical solution. For example, if you suffer from an illness or disability that means your health could be at risk if your energy supply was cut off.
If you have a prepayment meter, you prepay for your energy with a smartcard, or key that you can top up and use as needed. The amount you’re charged for your energy will reflect how quickly you’re paying back your debt. But even without paying back the money you owe, prepayment meters are an expensive way of buying energy.
4. You could be chased by debt collectors
If you owe money to your energy supplier and you refuse to pay off your debt, your details may be passed to a debt collection agency. They are used if you have been in debt for some time, and have received a default notice. Usually, the only situation where an energy debt can be written off is if the debt is more than 12 months old, and the supplier is at fault in the way your bill was calculated.
A debt collector isn’t a bailiff who can enter your home and take goods to cover your debt, but they are specialists in debt recovery. You’ll initially receive letters chasing the debt, and ultimately could face court proceedings and bailiff action. If you’re being chased by debt collectors, it can be a particularly unpleasant and stressful experience. Additional charges and interest may be added to your account. If you continue to ignore debt collectors, it’s likely that your refusal to repay will be reported to the credit reference agencies, which will further damage your credit rating. You could also find that a collections lawsuit is filed against you in court.
5. You could receive a county court judgement (CCJ)
If an energy supplier takes legal action against you for refusing to pay your energy bills, you could receive a county court judgement (CCJ) against you. Notice of a CCJ being filed against you will usually arrive in the post, and detail the amount owed, how to pay, and the deadline. If you ignore a CCJ, you could be taken back to court and forced to pay your debt. You could face a visit from a bailiff to recover the debt. A CCJ could also have a dramatic impact on your life, as it can affect your ability to get credit for up to six years. This means you may be unable to get a mortgage, loans, credit cards or utility contract for this time period, seriously hindering your future plans.
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6. Refusing to pay could cause wider problems
The Government has warned that 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.”
7. You could be disconnected (but this is unlikely)
As a customer, you’ve signed a contract with the energy supplier to pay your bills, and your provider is within their rights to take legal action or, ultimately, stop supplying you with energy.
However, it’s very unlikely that missing an energy bill payment would result in disconnection. Your supplier would need a warrant to enter your home to disconnect your supply, and once it has this, you must still receive seven days’ notice in writing.
You cannot be disconnected at any time by any of the six largest suppliers – EDF, British Gas, npower, E.on, Scottish Power and SSE – if you have long–term health problems, serious financial problems, a disability, or young children at home. Smaller suppliers may have similar criteria that mean you cannot be disconnected in these circumstances.
If you can afford to pay, however, but are simply refusing payment, you may be told by your energy provider that your gas and electricity supply could be disconnected if you haven’t paid a debt after 28 days of being notified. Usually, though, your supplier will offer a range of payment options rather than actually disconnect you if you’re struggling to pay, such as a payment plan or prepayment meter.
If you’re a pensioner living alone, or a pensioner living with children under five, you cannot be disconnected between 1 October and 31 March, even if you’re in debt and unable to repay it. Bear in mind, though, that outside of these dates suppliers are more likely to proceed with disconnection after a long period without receiving payment.
If you’ve on a prepayment meter and don’t top this up, your supply may stop. However, you can request emergency credit from your supplier, and to reduce the amount you’re repaying if you’re in debt. Read more in our article What can you do if you can’t pay your energy bills?
What can you 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. For example, the Scottish Power Hardship Fund provides a grant if you’ve built up more than £100 of energy debt on your account that you’re struggling to pay off. To find out what help your supplier is offering, and whether you might qualify, read our article Is your energy supplier offering grants to pay off energy debts?
If you’re feeling pressured to pay bills you cannot pay, or you’re worrying about how to afford escalating energy costs, you could also speak to a charity such as Citizens Advice, StepChange or Turn2us. Eligibility 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.
It’s up to you whether you join a campaign such as Don’t Pay UK, but it’s really important that you understand the potential implications of not paying your energy bills. There are other campaigns running, too, such as Fuel Poverty Action’s Energy For All, which is calling for a free amount of energy for all households to cover basic needs, such as heating, cooking or lighting.
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