Analysts predict the price cap could pass £4,000 by the end of the year.
We’re already paying huge prices for our gas and electricity, and that’s going to continue with massive increases coming on 1 October, and probably 1 January too, when the price caps next change.
If the estimate of £4,200 a year (for an average bill) is correct for the new year, that would mean a monthly Direct Debit of £350. That’s more than double what it is under the current price cap rate.
Compare that to the monthly cost on a variable tariff at the start of the year (£117) and it’s three times as much. If you’ve been on a cheaper fixed deal around that time then it could easily be almost four times as much.
Existing bills are too much for some. Finding an extra £200 a month just isn’t going to be possible for some people. And if your bills are above average, then the increase will be even higher.
So what do you do if you can’t – or don’t want – to keep paying such high bills?
If you can’t afford to pay
Whether you’re rich or poor, the size of future energy bills, let alone current ones, is going to be scary. Any savings built up could easily have been depleted already, and cutting back on bills and other expenses can only go so far.
Though some measures were announced by the Government in May, including £400 off bills for all households and up to £800 more for those on certain benefits, that’s not going to be enough to cover the next increase.
With the Conservative Party leadership election not completing until 5 September (and with Parliament off on summer holidays), it’s unlikely we’ll see any extra help anytime soon, if at all.
So where does that leave you if you can’t pay now, or expect to be in that situation soon? Sadly these options aren’t going to make much of a difference.
Use less energy
Though still important to follow, basic energy saving tips to reduce usage won’t lower bills enough to make them affordable. And besides, there’s a good chance you’ve already tried most of them.
And you obviously need to be careful that turning off heating in colder months doesn’t negatively impact your health, particularly if you are vulnerable.
There might also be grants available for insulation that will cut out waste and reduce bills – though these could incur some upfront costs if the full amount of the work isn’t covered.
Talk to your energy provider
It’s vital you chat to your supplier as they may be able to lower your Direct Debits so they’re more accurate (there have been examples where the monthly repayments have been increased excessively).
Or they could work out a plan for clearing any debt you build up rather than ask for it all in one go.
This won’t change the fact that you’ll still have to pay for the energy you’ve already used and will use in the future. But this arrangement might avoid some of the consequences of not paying, listed further down this article.
Apply for extra support
Some of the most vulnerable households might be able to get extra money from their local authority, charities or even energy companies in the form of a support grant. But this won’t help most people.
Deprioritise other debts
If you can’t pay your energy bill then you probably can’t pay other bills either – or won’t be able to soon. But some payments are more important than others. Your rent or mortgage are key, as is Council Tax. Not paying these, along with energy bills and some others, could be devastating.
However non-priority debts, including water bills, credit cards and parking tickets won’t see you end up homeless or without power if they aren’t paid.
You could also seek broader debt help from organisations like StepChange and National Debtline to help you manage larger money issues. This won’t avoid the massive energy bills, but it might prevent other debts getting bigger.
The consequences if you stop paying
Whether you can’t pay or choose not to pay, there will be an impact on how much you pay and your ability to borrow in the future.
You’ll lose your Direct Debit discount
Most energy companies offer a discount if you pay by Direct Debit. If you cancel your automatic payment you’ll be billed at a higher rate.
These quarterly bills will likely also be based on usage (estimated if you haven’t given a reading or don’t have a smart meter), which means bills could be even higher in the winter than the Direct Debit would have been.
There could be a late payment charge
Within your contract with the supplier, it probably allows them to charge you a penalty if you miss a payment.
You’ll still owe the money
Any arrears you build up from non-payment won’t disappear. They’ll still be on your bill and you’ll still need to pay.
Even if you negotiated a repayment plan, splitting the debt over a number of months, that will be on top of the usual payment.
And if that isn’t paid, it could eventually get passed onto a debt collection agency.
It could hurt your credit report
If you miss a regular payment and don’t make a manual payment before the bill date, it will be reported to the credit reference agencies and appear on your credit report in the same way as a missed credit card payment would.
This would suggest to future lenders that you can’t manage borrowing, and make it harder to get a mortgage, credit card, mobile phone contract and more.
You might be forced onto a prepayment meter
Eventually, customers in debt to their energy company are usually moved over to a prepayment meter where you top up before use. Though some people prefer these for budgeting purposes, they are always more expensive than the standard meter, meaning you could end up paying even more.
However, as my friend Sara at the Debt Camel blog points out, there won’t be enough of these meters available to install them in huge numbers of properties. So the chances of this happening to everyone are probably lower if it’s the result of mass action – but that doesn’t mean it won’t happen to some.
There’s a small chance you’ll be cut off
It’s less likely this could happen, but if you build up large debts and don’t repay them the energy companies can stop supplying your gas and electricity.
Not paying as protest: Don’t Pay UK’s campaign
There’s a lot of chatter on social media around the Don’t Pay UK campaign. This encourages a collective protest against the unaffordable energy bills through a mass cancellation of Direct Debits on 1 October 2022.
Almost 100,000 people have pledged to take part, though organisers say it’ll only happen if 1 million people get behind it. I can see the appeal, especially if you can’t afford prices now, let alone when they go up again.
They cite the Poll Tax protests of the late 1980s and early 1990s as an example of where direct action did force the government into a policy u-turn. In this instance, organisers say the amount energy companies will lose through non-payment will push them to lower bills.
Andy’s Analysis – should you refuse to pay?
I agree that it’s disgraceful that energy companies have been allowed to make such huge profits (though that’s nothing new) while households and businesses are forced to cover bills that would have been unfathomable a year ago.
And I like the idea that some direct action will force some kind of change. But I don’t see this forcing energy companies to reduce bills.
And if you choose not to pay it will have an impact on your finances that could last for years to come, so I don’t think you should do this if you have the money available to cover the bill.
Really the only thing that will make a difference right now is direct intervention by the government. It’s desperately needed – so let’s hope they get their act together sooner rather than later.