Why does every tarrif have a cancellation fee

skelt6or

After having compared my energy prices, I have found that even the variable tariffs have cancellation fees of up to £60 if you move suppliers within a year!!

Is this legal?

If my supplier raises prices I want to be free to move to a cheaper supplier!!

Premier_2

skelt6or wrote: »

Why does every tarrif have a cancellation fee

Simple answer - not every tariff does have a cancellation fee.

But there are an increasing amount of tariffs (not the standard tariffs) that do have the early exit fees. It's legal and designed to put of serial switchers/cash back tarts.

Cardew

I don't think many(any?) of the Standard Tariffs have a cancellation fee.

If companies offer the inducement of a tariff with lower prices than their Standard tariff, then they consider it is reasonable to charge a 'modest' penalty if you leave before a fixed period; you can look upon it that you have entered a contract.

Another reason is that lots of people were moving from supplier to supplier as quickly as the could solely in order to get cashback for switching. Penalty payments remove that incentive. They can still do that switching from Standard tariff to Standard tariff - but the higher prices make it a less attractive practice.

ic

The suppliers argued that they needed a tie-in in order to justify them investing in smart meters. Their argument was that if somebody switched to them, got a meter installed and then switched again, they lost out on the deal, so the charges were to prevent people doing that. Ofgem agreed and now we have the charges.

backfoot

It's a hindrance to true competition.

I don't buy any of the explanations given above and believe it is a practice which should be outlawed by the Regulator. These penalties have grown and grown and Ofgem sit on their hands as usual.:mad:

Ken68

What should be made illegal, Skelt, are the deliberately complicated tariffs.
Cashbacking still do-able if you align a saving with an offer, though with diminishing returns. Still would have thought £300 easy in one year. No different than , say, nPower paying all those door knockers £100 a time.

MillicentBystander

Totally agree with backfoot. You know, I'm genuinely not convinced there are that many 'serial switchers' and that must be the reason for the implementation of exit fees. I think that's a red herring put about by industry patsies. The real reason is to stop switching full stop, at least for a year, not necessarily serial switching. And it once and for all blows out of the water the oft-quoted industry insider mantra that the UK energy is 'one of the most competitive in the <quote region depending on the poster's level of hyperbole>. How can anyone with any credibility still claim we have a competitive energy market in the UK when even the variable tariffs have exit fees? We've seen what npower, for example, have done to their just months old signonline tariffs recently (one poster on here with low consumption suddenly saw his bill rise by over £250/year whilst still under npower's min. term to qualify for the £105 annual discount and the £40 exit fee). It's yet another example of the mess this industry has become since privatisation. We now have so many companies/individuals leaching off it that it can only be described as a mess.

mattcanary

Surely switching more often than once a year is serial switching?

MillicentBystander

mattcanary wrote: »

Surely switching more often than once a year is serial switching?

Good question. I know a person who kills two people in one year isn't called a serial killer if that helps*. Seriously, a serial switcher in my book would be someone like me who tries to switch 4 times per year, each and every year. Someone who moves to a tariff which is then upped to a ridiculous amount so takes his/her business elsewhere wouldn't, to me, constitute a serial switcher.


* Interestingly, people like Derek Bird & Michael Ryan aren't classed as serial killers, either (they are mass murderers). I believe to be classed as a serial killer you have to commit at least 3 murders in a 30 day period and each murder has to have a 'cooling off' period before the next one (this is what the authorities believe Stephen Griffiths aimed for). What a pleasant topic, lol.

sweetnorthenlass

they are just out to make money from us. the government need to stop this scam... just like the did with cash point charges a few years back... and the loan shark clamp down

Pincher

What if they blacklist frequent switchers instead?

So, no exit penalties, but the industry simply refuses to offer you cheap rates. People with a history of frequent switching will only be offered standard tariff, because the supplier can't defray the set up and transfer admin cost if you go off after a few months.

I proposed a loyalty bonus scheme a few months ago, where you build up a loyalty discount for every year you are with a supplier, like a car insurance no claims bonus. E.g 1% a year, so you get 0% discount in the first year, 1% in the second year, etc. up to a maximum. In the first year, you are better off because you signed on to a cheap deal.
In subsequent years, you can try to switch to other deals within the same supplier.