What to do if you can’t afford your energy bill

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Sometimes things just don’t go your way, and you’re left wondering how you’re going to pay that next bill. That’s a question made all the more difficult when you don’t even know how much that bill is going to be. But that’s how energy bills typically go.

The fact that energy bills are rarely predictable means it’s difficult to plan ahead, and if your finances aren’t where you’d like them to be, that’s a classic recipe for bill stress. If you’re not sure how you’re going to pay your next power bill, and wondering what will happen if you don’t, Canstar Blue has produced this guide, outlining all you need to know.

I can’t afford my energy bill, what should I do?

As soon as it becomes obvious that you won’t have the money available for your next energy bill, pick up the phone or go online and contact your retailer to explain the situation. The earlier you can advise your energy company that you’re short on cash, the better. If this is the first time that you’ve struggled to get the cash together, chances are your provider will simply grant you an extension of a week or two. If this is not the first time, your provider may want to talk to you in more detail about your payment options.

What happens if I don’t pay my energy bill?

If the bill due date comes and goes without you paying, your energy company will likely send you a reminder within a couple of days, via email or post. This is when you first start to see the red font and capital letters demanding payment. You may also incur a late payment fee of around $10-12.

Aside from your energy provider, there may also be consequences in regards to your bank account. Keep in mind that:

• If you have a direct debit set up but not enough money in your account to cover the bill, your bank may still allow the payment to go through, potentially sending you into an unplanned overdraft. This is likely to mean you incur a fee from your bank.
• On the other hand, your bank may reject the payment to your energy provider and return the money to your account. This could also see you incur a fee from your bank.

Also keep in mind that if you have an energy plan with a pay on time discount you are likely to lose this discount and consequently need to pay more.

What happens if you keep missing your bills?

It’s common for energy providers to grant a short extension to customers who need some extra time to pay their bills. But if the problem becomes more serious and bills are regularly missed, customers may be placed on a hardship program where customer and provider agree a payment schedule to clear the debt owed.

If you continue to ignore your bills, your energy provider may issue a disconnection warning, at which point things are getting really serious. Energy companies may also involve debt collection agencies to make sure that debts are recovered.

Will my power be cut off if I don’t pay my bill?

Ultimately, your energy provider has the power to disconnect your property from the energy network, but that’s a last resort no one wants. Your home will only be disconnected if you refuse to engage with your provider and continuously fail to pay your bills. Energy providers must comply with strict guidelines set out by industry regulators when it comes to dealing with customers in financial hardship and cannot disconnect customers who are taking part in a hardship program and making an effort to pay their debt.

Does not paying my energy bill hurt my credit score?

Yes. Credit reporting agencies collect information on things like how many loans or credit cards you have, as well as whether you pay your bills on time. Not paying your energy bills on time is likely to negatively impact your credit rating. Some energy companies conduct credit checks of customers before allowing them to sign up.

You can check your credit score for free here

What does a hardship policy involve?

While customers can request to join their energy company’s hardship policy, it’s more likely that the provider will suggest it when a customer is clearly having issues keeping up with their bills. So, what does a typical hardship policy involve? To find out, we’ve used the example of Origin Energy’s ‘Power On’ program (other retailers have different names for their hardship policies).

On its website, Origin says the Power On program is there to help customers get back on top of their energy bills. Some of the ways it says it can help customers out is through:

• Flexible payment plan options
• Information on Centrepay and how to set up deductions from your Centrelink payment
• Redirecting their bills to a third party at no charge
• Energy efficiency tips and ideas
• Help with signing up for state concessions and rebates
• A referral for financial counselling
• Switching to a different Origin energy plan that suits their needs better

Customers may be required to provide supporting evidence of their financial hardship to join the program. Once accepted, customers will also need to agree to work with Origin to pay off their debit and make all scheduled payments in full and on time. Assuming the plan has worked successfully, customers will complete the program and return to normal billing terms.

Energy company hardship policies are approved by the energy regulators to ensure that providers make adequate effort to support customers and that disconnections are a last resort only.

How to be better prepared for energy bills

This is a tricky one because energy bills are notoriously difficult to predict, but there are some things you can do:

• Download your energy provider’s app: Most of the big energy companies have useful apps that either monitor your energy usage (if you have a smart meter) or at least provide bill predictions so you know roughly how much your next bill will be.
• Ask your provider about bill smoothing: Most energy providers will happily set you up on a bill smoothing plan, especially if you’re having trouble paying bills on time. ‘Bill smoothing’ means you pay the same agreed amount each month, so you avoid the peaks and troughs of seasonal energy usage and know what you have to pay each time.
• Make sure you’re not paying too much in the first place: Lots of people cut back on their energy usage to reduce bills, but if you’re on a bad energy deal, you’ll already be paying too much. Find a cheap plan and you’re a step closer to making power bills more affordable.

We hope this guide helps alleviate any stress you’re suffering about your power bills. It’s important to pay your bills as soon as you can – it’s your responsibility and there are consequences for not doing so – but if you’re struggling, your provider is obliged under National Energy Retail Law to make every effort to support you before the last resort of disconnecting your home. Be sensible. Talk to your retailer. And you’ll be able to manage your bills.

Trying to reduce your household energy bills? See what appliances are chewing through your electricity the most in Canstar Blue’s guide to the most energy draining appliances.

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Image credits: Yevhen Prozhyrko/Shutterstock.com, Doucefleur/Shutterstock.com, Antonio Guillem/Shutterstock.com, Milleflore Images/Shutterstock.com