Exit Fees on Headline Grabbing Tariffs - A worrying trend?

jb5 · 22 August 2009 at 2:05PM

I'm starting to have second thoughts about my impending switch from Scottish Power (online 4) {No longer available} to EDF (online v5), for reasons I had not considered until now. I will attempt to explain what I mean.

Having found the SP OL4 to have been reasonably competitive over the 18 24 months that I have been on it (no worse than £35 more expensive than the best offer, excluding any cashback deals), I'm starting to wonder if I might be better off staying where I am.

On EDF's OL v5 I would make a saving over the year of £94 (£60 of which is cashaback), based on last years usage (kWh).
OK, so far so good.
Trouble is, the eventual swap to EDF's standard online tariff in August 2010, would be absolutely terrible (£115 worse off), negating this years savings entirely.
No problem. Just switch - right?

Well that would be OK - but for the worrying trend that appears to becoming more prevalent;
It seems to me that more and more energy providers are starting to impose contractual commitments, with exit fees for early release, on some (most?) of their best tariffs.
The immediate effect is to limit/eliminate churn in the market (i.e. 'supplier tarting'), but I wonder if there is perhaps another aspect to this phenomenon?

My concern is that this this exit fee "tactic" can be used by the energy companies to effectively corral consumers into two or three yearly "slots" where any number of contracts come an end at the same time. Wouldn't it then be easy for the energy companies to only provide tariffs that are quite poor at these pre-determined dates?
{I appreciate that an "open market" is supposed to stop this happening, but it is a concern to me that 'many/most?' of the new tariffs appearing, are starting to impose exit fees, and all from many 'independent' energy companies}.

If, this is the case, (and it's a big IF), it wouldn't take long before most people ('tarts' at least) would be on contracts that end in April, August or December for instance, and the energy suppliers start to "control" the market!

Too paranoid?
Any Thoughts?

Edits in RED

Cardew · 22 August 2009 at 2:56PM

Interesting points.

My own opinion is that the smallish exit penalties are, as you point out, to deter the serial switchers(tarts). It obviously is a nonsense that people have been able to switch several times a year and 'earn' £200+. This money, plus the huge clerical effort involved by the companies is eventually paid for by us customers.

NOTE: I am making no criticism of those who took advantage of the loophole; I am just pleased the companies are attempting to stop the practice.

As I posted in another thread, the exit penalties are really quite small(£30 a fuel) so should prices drop and another cheaper fixed tariff become available then it might be time to 'bite the bullet' and switch regardless.

In another thread there is justified criticism of BG in not letting those on Websaver 3 switch to the cheaper Websaver 4 without paying the exit penalty. It would be interesting to see if BG would waive the exit penalty if they thought that the customer would leave BG.

1carminestocky · 22 August 2009 at 6:58PM

Of course it's a worrying trend industry-wide but when you get the biggest UKenergy supplier making its loyal customers pay an exit fee TO TRANSFER TO ANOTHER TARIFF WITH THE SAME COMPANY then this industry is heading for the dustbin. This is sharp practice, no other way to describe this. Ofgem? HaHa!

PS The rate tart argument is a totally redundant one - if the energy suppliers don't want people to become cash back tarts it's very simple - don't offer cash back in the first place. Try and compete on what businesses should compete on - giving the punter a great service at a value for money price.

Gerrard_8_lfc · 23 August 2009 at 2:25AM

As Cardew and Carmine say the websaver issue is a disgrace.

I am on websaver 3 as it works out the cheapest for me with staff discount but to my disgust I am not allowed to switch to websaver 4 to help save money.

I have no intention of leaving (yet) but why treat customers like that ?

Good service says a lot for a company and BG should worry because online tariff deals come and go in a matter of months many people like me may seek another supplier come dec.

The tariff is variable so say prices rocket why should I be held on a more expensive tariff that is not used as protection against price increases.

Fixed penaltys should only apply to fixed price deals. I dont want to leave the company so why should I be punished by staying "loyal" to the company by moving tariffs in a act to save money.

alared · 23 August 2009 at 8:06AM

It is a worrying trend but I`m afraid one that`s not going to go away.
The prevous two poster`s know where I stand by my post # 11 on the other thread.
http://forums.moneysavingexpert.com/showthread.html?t=1894041

But of course there`s no way that is ever going to happen.

I recently did something I would never have thought possible, I switched my electricity to B Gas (probably the biggest "con artists" in the country).
But at the end of the day after doing my own calculations I couldn`t ignor a £45 a year saving.
I did it through Energyhelpline to get the £15 cashback on 29th June 09.
Having read the T&C, I was fully aware that I was tied in to W3 until 1st Dec 09 by a £30 penalty.
Whilst I agree with the OP, at least I was fully aware that I was stuck on W3 for approx 4 months.
(switch went through on 22nd July)

The other thing I`ll mention is within two days of applying to switch to BG,they phoned me up to discuss the transfer and offered me the option of being "fast-tracked" to them on condition I waived my 7 day cooling off period rights.(catching you before you change your mind but I`m not sure how this would stand up legally)

Yet another worrying trend.

Joyful · 23 August 2009 at 8:14AM

Alared

Re the call for waving the cool off. Many customers don't like change of suppliers process being dragged out. The other important fact is Erroneous Transfers can be picked up quickly ie if the supply has been taken over incorrectly. Much better than waiting perhaps 6 weeks or more to find this out.

1carminestocky · 23 August 2009 at 11:18AM

As a BG employee, any views on what Cardew, myself and Gerrard_8_lfc have been been discussing, Joyful?

alared · 23 August 2009 at 11:52AM

Joyful wrote: »

Alared

Re the call for waving the cool off. Many customers don't like change of suppliers process being dragged out. The other important fact is Erroneous Transfers can be picked up quickly ie if the supply has been taken over incorrectly. Much better than waiting perhaps 6 weeks or more to find this out.

Of course that is one explanation and I did have the option of declining it and retaining my 7 day cooling off period.
In my case I was certain I wanted to switch and took the option which ended up with my transfer being completed in just over three weeks.

Lets hope when the time comes, BG are as swift to let me go!

jb5 · 24 August 2009 at 12:47PM

Cardew wrote: »

As I posted in another thread, the exit penalties are really quite small(£30 a fuel) so should prices drop and another cheaper fixed tariff become available then it might be time to 'bite the bullet' and switch regardless.

Yes the exit fees are small, at the moment.
Effectively they wipe out the cashback, so mission accomplished for the energy companies.

Cardew wrote: »

In another thread there is justified criticism of BG in not letting those on Websaver 3 switch to the cheaper Websaver 4 without paying the exit penalty. It would be interesting to see if BG would waive the exit penalty if they thought that the customer would leave BG.

I agree, it's the perennial problem (not limited to energy companies) that new deals are not available to existing customers. Infuriating.

1carminestocky wrote: »

if the energy suppliers don't want people to become cash back tarts it's very simple - don't offer cash back in the first place. Try and compete on what businesses should compete on - giving the punter a great service at a value for money price.

Absolutely. On the one hand, companies are trying to stop people switching all the time, and then they restrict access to new deals, forcing customers to shop else-where!
I imagine they hope that apathy takes over and enough consumers just give up and stick where they are. Madness, but what do we expect!

Gerrard_8_lfc wrote: »

because online tariff deals come and go in a matter of months

Confusion marketing.

Gerrard_8_lfc wrote: »

The tariff is variable so say prices rocket why should I be held on a more expensive tariff that is not used as protection against price increases.

Fixed penaltys should only apply to fixed price deals. I dont want to leave the company so why should I be punished by staying "loyal" to the company by moving tariffs in a act to save money.

Yes, that's right. These new deals have all the penalties of a fixed rate tariff but without the security of the same!
Potentially, very dangerous for the consumer.

Returning to my impending switch, I did some more calculations through energyhelpline and my new favourite ukpower - {I like the way ukpower breaks down the tariff into gas & electricity, and they also seem to display tariff info for more companies & more tariffs - don't know if they offer cashback}.

Anyhow, as best as I could manage (I don't have a crystal ball), I compared my existing fuel usage against all the other online tariffs (past & present) for my current supplier (Scottish Power) and EDF, my proposed switch. Thank goodness for iMacros!

It made for interesting reading.

TOTAL        Rank    &#916; EDF OL 5        &#916; SP OL 4
SP    OL 3      £461.00        6      £79.00            £47.00
      OL 4      £414.00        2      £32.00            £0.00
      OL 5      £433.00        4      £61.00            £29.00
      OL 6      £423.00        3      £41.00            £9.00
EDF   OL 1      £480.00        7      £98.00            £66.00
      OL 2      £480.00        7      £98.00            £66.00
      OL 3      £448.00        5      £66.00            £34.00
      OL 4      £480.00        7      £98.00            £66.00
      OL 5      £382.00        1      £0.00            -£32.00

Basically, I could save £32 this year (+cashback). Then, all else being equal, I would have to switch back to SP, and lose £9 each year.
So, I either stick where I am, or switch - and if nothing else changes, I would then be locked into a switching cycle in order to remain competitive!
Complete and utter madness, but that seems to be the game the Energy Companies are forcing the consumer to play!

I still have a couple of days to think about it, (I thought it was 14 days cooling off period It is twelve days with EDF, certainly with this tariff), but my current inclination is to stick where I am and cancel the switch. Then wait and see what happens, though I am not at all optimistic, given where we appear to be heading.
Edits in red.

1carminestocky · 24 August 2009 at 1:40PM

Great points and excellent research. I can (half!) excuse the need for an exit fee on a fixed deal, but it's very worrying when they are now placing exit fees on variable tariffs (and, in the disgraceful case of BG, charging you the fee even if you wish to transfer to another tariff with the same company!). Variable tariffs are just that - variable. Meaning once the tariff has been 'superseeded and no longer is current) there's nothing stopping the supplier upping the prices knowing full well that their punters are effectively 'in captivity'. This sort of business practice should never be allowed by the regulator.

epsilondraconis · 24 August 2009 at 2:21PM

Regarding the exit fees on the EDF online v5 tariff as highlight by the OP, I contacted EDF by e-mail to ask them to clarify their T&Cs. I actually switched from SP to EDF over the weekend and so can obviously cancel the switch as I'm within the cooling off period. Do people think the EDF e-mail response should mean that I should be able to switch away from that tariff without penalty (or a lot of hassle) at some point in the future. Thanks in advance for any feedback.

My e-mail to EDF:

To whom it may concern,

Please can you tell me whether a termination fee (or indeed any such termination penalty) exists with the EDF online v5 tariff if I switch away from this tariff before 31st July 2010. The reason for asking is that within the T&Cs online it indicates:

"You agree to remain on the EDF Energy Online Tariff Version 5 for each account until the Online Tariff Version 5 comes to an end, which,unless we write to you to advise of any extension, shall be 31 July 2010 (the 'End Date')."

Thank you for your feedback.

EDF response:

Thank you for your e-mail.

There is no termination fee for the online version 5. Clause 6 to which you refer should be read in conjunction with the last sentence in clause 5. It states that should you change your tariff or supplier before 31st July 2010 then you will not be able to go back onto the online version 5 tariff in the future.

I hope this clarifies the term and condition under scrutiny.

Kind regards
EDF Energy

Exit Fees on Headline Grabbing Tariffs - A worrying trend?

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