MSE News: Would you fix your energy costs for five years?

Former_MSE_Archna

This is the discussion thread for the following MSE News Story:

"EDF Energy recently launched the Fixed Price 2015 deal that costs £1,197 a year for a typical family, according to price comparison site Energyhelpline.com ..."

Read the full story:
New five year energy fix rate

These threads have been merged to avoid duplication. Thanks to Gerrard_8_lfc for the orignal post.

Gerrard_8_lfc

Just to let people know who like long term caps I got an email in work today telling me about competitor news and EDF have just launched a 5 year fix. (2015)

• Price Guaranteed until 2015
• 7% Increase in price from EDF Standard
• Exit penalties apply.
• 100 fee per fuel, if they leave before June 2011
• £75 fee per fuel, if they leave before June 2012
• £50 fee per fuel, if they leave before June 2013.

I think it will be a rather expensive tariff however no one knows what the future holds for our prices. The exit penalty is high.

Cheers.

Dave_save

Well, all energy companies are at it aren't they, including BG? I think it's time the price comparison sites started to factor in these exit fees when they give us the bottom line prices. They're now a penalty against free choice and competition. I'm sure OFGEM will be seriously looking into this practice :rotfl:

kjsmith7

Dave_save wrote: »

Well, all energy companies are at it aren't they, including BG? I think it's time the price comparison sites started to factor in these exit fees when they give us the bottom line prices. They're now a penalty against free choice and competition. I'm sure OFGEM will be seriously looking into this practice :rotfl:

I'd beg to differ. You have a free choice to lock yourself in. If you locked yourself into say, a mobile phone contract, for say... 24 months and left after 12 months, they'd charge you an "exit penalty" of your remaining line rental charges that you would have paid. I'm sure the gas and electricity companies could estimate your usage for the remaining years on your contract and charge you that instead? Very likely more than £100? A contract is a contract.

markharding557

Given they are offering a fix at 7% above standard for 5 years would suggest they are not expecting wholesale costs to rise much in that time so i would leave well alone

Dave_save

kjsmith7 wrote: »

I'd beg to differ. You have a free choice to lock yourself in. If you locked yourself into say, a mobile phone contract, for say... 24 months and left after 12 months, they'd charge you an "exit penalty" of your remaining line rental charges that you would have paid. I'm sure the gas and electricity companies could estimate your usage for the remaining years on your contract and charge you that instead? Very likely more than £100? A contract is a contract.

My main point was, that if you do a comparison, more and more tariffs come with a lower price and a higher exit penalty. So when you compare, all is not what it seems.

Personally, I choose not to tie myself into contracts that penalise me. It is a PENALTY not compensation for any loss. Does anybody know how they set these 'penalties'? Another smoke and mirrors exercise from our discredited utility companies maybe?

So why do utility companies do this? Well I suppose it's just an easy way of guaranteeing a fixed revenue over a set period, irrespective of their costs, efficiencies or their skills at negotiating lower energy costs with suppliers.

SwanJon

markharding557 wrote: »

Given they are offering a fix at 7% above standard for 5 years would suggest they are not expecting wholesale costs to rise much in that time so i would leave well alone

It might be that they have managed to come to a simlliar agreement with their suppliers, and are passing this on - I can't imagine a company willing to totally fund this temselves - they'll want to pass some of the risk on (in both directions)

Dave_save wrote: »

My main point was, that if you do a comparison, more and more tariffs come with a lower price and a higher exit penalty. So when you compare, all is not what it seems.

Why? If you stick to the T&Cs you agree to , you will only pay what the comparison suggests (assuming consumption doesn't change)

Dave_save wrote: »

. Does anybody know how they set these 'penalties'? Another smoke and mirrors exercise from our discredited utility companies maybe?

I don't know where the exact figures come from, but as I said above, they are not funding fixed rates themselves - they will probably have a (more) binding contract with their suppliers to continue to buy a certain amount of energy at a certain price - they won't be able to get out of it as easily as you.
As for non-fixed rates, I don't 100% agree with the exit fee, I'm fairly sure it is to discourage serial switching, and the costs associated with this for the supplier. An alternative would be to rebill you on the standard price if you left early.

PS - I work for BG

Bark01

The exit fees are there to cover the energy brought in advance. If you sign up to a five year deal the company would expect yo uto stay for 5 years so would hedge gas for you to cover a five year period. If you leave after a year then they will have brought 4 years to much gas.

*** Thats a very simplified view

Cardew

Dave_save wrote: »

Well, all energy companies are at it aren't they, including BG? I think it's time the price comparison sites started to factor in these exit fees when they give us the bottom line prices. They're now a penalty against free choice and competition. I'm sure OFGEM will be seriously looking into this practice

I suspect the main reason for exit penalties is to curb the activities of the serial 'switching tarts'.

Many people on here state they switch several times a year purely for the cashback.

'free choice and competition' opened up a loop hole that the companies understandably needed to close.

davidgmmafan

I am not a fan of exit fees per se but on such a long deal I think it is ok. I'm on SOL17 with NPower which will save me around £200 over the year, against that my exit fee of £20 per fuel is of no consequence. It just means I need to be saving more than £40 before I even consider switching.

I think fees would only be a problem if everyone was doing it which I don't believe is the case at the moment.

I doube even energy companies know what will happen with prices, I'd guess the trend will be upward what with our puny storage capacity and ever increasing demand from countries which are industrializing at a reapid rate.

teddyco

Maybe this is the start of a downward movement in energy prices or price war
and the energy companies are trying to tie in customers before prices start to fall?

I did see in the Wall Street Journal today that the UK approves a massive natural gas
storage facility due to come on line in 2014. That should give users of natural gas some relief.

http://online.wsj.com/article/SB10001424052748704431404575067101794535996.html?mod=googlenews_wsj