What the hell does fixed rate really mean?

withnailuk · 17 December 2016 at 12:26AM

Eveining all, I decided after nearly ten years of pre-payment on my gas & electric to sign up to a two year FIXED RATE agrement with Npower . All was well , I was paying £77 for both , ( A good saving! ) untill I recieved a email from Npower stating that my bill had gone up to £92 a month. You can call me a halfwit:o but I was under the impression that fixed rate meant that my bill would not be affected by any price rise? Am I missing somthing here?

Richie-from-the-Boro · 17 December 2016 at 12:41AM

Fixed rate means your unit rate stays the same for the duration of the plan (usually 12 months). Use more units - pay more my friend.

frugalmacdugal · 17 December 2016 at 6:23AM

Hi,

right, halfwit, (you said I could call you that)

As above, your fixed rate per unit stays the same, say 15p a unit, but your usage could vary.

For months you use 100 units a month so £15 a month, then a cold frosty snap, so using more heating and using 200 units a month, so now £30 a month.

If you're supplying regular meter readings, (if not then you should be) or there has been an actual meter reading, your supplier says, 'uh uh, halfwits not paying enough and is going to get into debt, we better increase his monthly payments', so they adjust your DD.

To get your DD down again try and see if you can cut down on usage.

System · 17 December 2016 at 10:00AM

frugalmacdugal wrote: »

Hi,

For months you use 100 units a month so £15 a month, then a cold frosty snap, so using more heating and using 200 units a month, so now £30 a month.

.

The OP has asked a reasonable question; the above is not how it works. It works like this:

You sign up to a Fixed Tariff with set prices for an agreed time ( say 12 months). Based on your projected annual usage of say 12000Kwhs/gas, the annual cost is projected to be £480 per year or £40 per month.

After 6 months, the supplier reviews your projected annual usage based on 6 months worth of consumption. This calculation uses weighted %s to take into account usage for each month: that is, more gas used in February than June.

On the basis of this re-calculation, let us assume that the supplier now estimates that you will use more than £480 per year projected cost. Its calculations show a revised annual cost of £540.

The supplier then re-calculates the monthly payment by taking the new annual figure of £540 from which it deducts the £240 that you have already paid which leaves a balance of £300. If you have 6 months of your fixed term left, then the revised monthly DD payment will be £50 per month. The aim is to achieve a zero balance at the end of your fixed term contract.

Cardew · 17 December 2016 at 10:45AM

I think many people think that a fixed rate is similar to an 'all you can eat' for £xx menu. Rather like the old 'Staywarm' tariff where you could indeed use as much gas/electricity as you wished for a fixed sum.(for the first year)

footyguy · 17 December 2016 at 3:30PM

withnailuk wrote: »

Eveining all, I decided after nearly ten years of pre-payment on my gas & electric to sign up to a two year FIXED RATE agrement with Npower . All was well , I was paying £77 for both , ( A good saving! ) untill I recieved a email from Npower stating that my bill had gone up to £92 a month. You can call me a halfwit:o but I was under the impression that fixed rate meant that my bill would not be affected by any price rise? Am I missing somthing here?

You agreed to a 2 year fixed rate TARIFF.
This means that the supplier will not change the agreed costs of that tariff for the duration of the contract.

The way most suppliers establish your initial monthly direct debit payment is by calculating your assumed annual cost based on the anticipated annual consumption you advise them of, and dividing that by 12.

If the supplier has considered it appropriate to increase your monthly payment by over 20%, you need to ask yourself why?
Knowing that the tariff is fixed, then the only other reason is that the supplier believes you are using more energy than you anticipated when you joined them. Are you?

Check the bills are based on actual, accurate meter readings

If you are not using any more energy, then this MSE article may assist you
http://www.moneysavingexpert.com/utilities/lower-energy-direct-debits

However, if you agree you are using an increased amount of energy than you originally anticipated, then you should consult a comparison site to ensure you are still on the best deal for your increased usage. Don't forget to allow for early exit fees if appropriate.
If you do decide there is a better deal available elsewhere, be aware that nPower will produce a final bill for you, which based on what you have said, will probably mean you will owe them money which they will want paying in full shortly after they issue that final bill.

teddysmum · 17 December 2016 at 3:31PM

If you feel that your payments are not keeping up you can request and increase before the six month reassessment, to prevent an even larger increase later.

I did this as my supplier automatically refunds any accumulation of credit over a certain figure, thus making my payments unable to keep up with winter usage. (The call centre person told me this would happen, when I rang to request an increase. duh.)

teddysmum · 17 December 2016 at 3:36PM

OP, if you have phone, tv or internet on a fix, be aware that in the majority of cases the fix refers to a fixed percentage of discount and not a fixed monthly payment. Therefore the product could go up by £4, but if you have a fixed 50% off, you only pay £2 more (ie 50% of the increase).

System · 17 December 2016 at 5:41PM

Just out of interest OP, have you signed up for a fixed tariff for your prepayment meters or have you had both meters exchanged to credit meters where you can really see a saving and get off the highest tariffs on standard/variable. This sounds similar to BG s con with their Fix and Fall tariff which is almost a standard tariff which falls if the prices fall.

Robin9 · 17 December 2016 at 6:58PM

"Fixed" DD's continue to cause mis-understandings for Utility consumers.

Many of us pay our Council Tax, Insurance by DD and that really is quite easy to understand as the annual bill really is fixed and the DD is the annual bill divided by 12 or 10 or 8. There is nothing to adjust.

With Utilities the DD really are a best guess at the start of the year - the weather, changes in our lives all can alter our consumption and hence the amount we have to pay.

Throw into the equation the consumer who ignores meter reading requests ................. and the result can be chaos.

cheesetoast · 18 December 2016 at 11:09PM

Consider this too.

Let's say you're with Company A, who charges 10p a unit, and you're paying them £50 a month.

Then, you switch to Company B, because they offer to reduce your payments to £40 a month. However, they don't tell you that they charge 20p a unit.

After a year, you've not paid Company B enough, so they hike your payments to cover ongoing usage plus the previous shortfall owed.

What the hell does fixed rate really mean?

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