Why does every tarrif have a cancellation fee

skelt6or

My original post should have stated that standard trariffs do not have a cancellation fee.

My gripe is with the variable tariffs that do have cancellations fees. I'm not bothered about switching around every 6 months but if my tariff prices were to go up, I would like the opportunity to be able to switch to a more competative tariff. Is that too much to ask?

MillicentBystander

Pincher wrote: »

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.

I tell you who wouldn't be happy about this happening (even though you've been thanked by a BG employees who clearly hasn't thought this through) - energy supplier employees and switching site employees. Would lead to lots of redundancies. And, maybe, energy companies themselves - they seem entirely happy with the situation at present! Maybe they claim the cashback as 'advertising/marketing' so it gets offset against their tax bill.

But I'm all for thinking outside the box. Here's a radical idea: what if energy suppliers, instead of whoring themselves on the switching/cashback sites, concentrated their efforts and resources on giving their existing customers the best possible service at the best possible price and maybe one or two simple to understand, unambiguously calculated tariffs instead of the myriad they have now? Revolutionary idea.

Cardew

skelt6or wrote: »

I would like the opportunity to be able to switch to a more competative tariff. Is that too much to ask?

As far as all the utility companies are concerned, yes it is too much to ask.

They offer an incentive - a cheaper price than their Standard tariff - but a penalty; normally if you leave before a certain date.

IIRC all of these cheaper tariffs guarantee that they will remain x% below the company's Standard rate.

It is normal practice with phone companies, banks etc to offer incentives which have to be weighed against penalties. e.g. I get a £5 a month reduction on my BT Broadband for agreeing a 12 month contract. BT could double the price of their Broadband from say £20 to £40 and I would be stuck with paying £35 instead of £15. I could have elected not to sign a contract.

MillicentBystander

Cardew wrote: »

As far as all the utility companies are concerned, yes it is too much to ask.

They offer an incentive - a cheaper price than their Standard tariff - but a penalty; normally if you leave before a certain date.

IIRC all of these cheaper tariffs guarantee that they will remain x% below the company's Standard rate.

It is normal practice with phone companies, banks etc to offer incentives which have to be weighed against penalties. e.g. I get a £5 a month reduction on my BT Broadband for agreeing a 12 month contract. BT could double the price of their Broadband from say £20 to £40 and I would be stuck with paying £35 instead of £15. I could have elected not to sign a contract.

In most cases the %tage guaranteed discount compared to standard rate is actually much less than what they are charging at the time you sign on the dotted line. There's nothing to stop them reverting to the actual guaranteed %tage discount any time during the penalty period, thus your bill can rise inexorably and, short of paying the exit fee and !!!!!!ing off, there's nothing you can do about it. Yet another example of what the energy companies are allowed to get away with.

drammy

Noob question...Im with Eon and thought about switching due to the recent price hike.
My contract doesnt end until November'11 so is it a case of I'm stuck until then unless I pay the cancellation fee.....or is there a get out clause if they raise the prices???
My letter says I can leave if I let them know within 20 days but it doesnt mention having to pay the cancellation fee?

MillicentBystander

drammy wrote: »

Noob question...Im with Eon and thought about switching due to the recent price hike.
My contract doesnt end until November'11 so is it a case of I'm stuck until then unless I pay the cancellation fee.....or is there a get out clause if they raise the prices???
My letter says I can leave if I let them know within 20 days but it doesnt mention having to pay the cancellation fee?

I've got some bad news for you. As well as the exit fee (which I'm afraid you are stuck with whether they raise the prices or not), E.on also have another 'exit fee' (OK, in true energy supplier fashion they don't call it an exit fee) because they don't grant ANY discount on your final bill. When you consider that the discounts they grant are what make Eon tariffs competitive and they can run to as much as 26% then this 'penalty' can be sizeable if you time your move wrong.

Yet another example of an enrgy supplier getting away with it - I would put money on just a tiny %tage of their customers knowing anything about this (I would bet there are so called experts on here who are with them and didn't know anything about this ). It's the never ending exit fee.

Plushchris

MillicentBystander wrote: »

But I'm all for thinking outside the box. Here's a radical idea: what if energy suppliers, instead of whoring themselves on the switching/cashback sites, concentrated their efforts and resources on giving their existing customers the best possible service at the best possible price and maybe one or two simple to understand, unambiguously calculated tariffs instead of the myriad they have now? Revolutionary idea.

I was thinking the same while watching that Mary Portas prog about estate agents last night. To be fair there is one supplier that is trying the above approach - Ovo, they only have the two tariffs on offer and both of those a fixed for 12 months and have fairly simple unit charges (Standing charge and a single unit rate) and no stupidly complicated discounts, in fact they have no discounts at all (has anyone looked at how BG apply their discounts?? I dont think they could have made them more complicated if they tried and they probably did!) Ovo do however come with a £60 exit fee - £30 per fuel

It would be interesting if all the other suppliers were to offer tariffs on the same basis, then we could really get an idea of the level of "competition"

Confusion marketing is rife in the industry with all the suppliers having different ways of billing and applying discounts, different unit breaks on no standing charge tariffs and offering the same tariffs with or without a standing charge does nothing for the consumer apart from confuse them.


And no, I dont work for Ovo before the accusations start flying, but I am with them and so far so good, my only gripe is the limited hours of their customer service department, but so far not had to deal with it much.

MillicentBystander

OVO's pricing structure is a definite step in the right direction, I agree. The only thing that would worry me is I don't know how they are funded and how they acquire their fuel. Despite delusions of grandeur with regard to the chairman's claims about acquiring 1,000,000 customers by early 2010 it would appear that they reportedly actually only had approx 30,000 by May 2010 (quite a difference!) I know another relative minnow (but far bigger company) in the G&E market almost went bust a few years ago by attempting to acquire its fuel on the wholesale market without incurring the cost of 'hedging' so I would need to know more about how OVO operate before I would consider them. Perhaps you would impart any knowledge you have in these areas, Plushchris?

Plushchris

MillicentBystander wrote: »

OVO's pricing structure is a definite step in the right direction, I agree. The only thing that would worry me is I don't know how they are funded and how they acquire their fuel. Despite delusions of grandeur with regard to the chairman's claims about acquiring 1,000,000 customers by early 2010 it would appear that they actually only had approx 30,000 by May 2010 (quite a difference!) I know another relative minnow (but far bigger company) in the G&E market almost went bust a few years ago by attempting to acquire its fuel on the wholesale market without incurring the cost of 'hedging' so I would need to know more about how OVO operate before I would consider them. Perhaps you would impart any knowledge you have in these areas, Plushchris?

Have to say I have no idea how they acquire their fuel, I personally dont regard that as a factor in my decision to switch to them.

What happens if they go bust?

I dont have to pay the cancelation fee for one thing! yes I may lose any credit on my account but that is kept far lower than the cost of the cancelation fee anyway (at the moment I believe I am in around £18 worth of credit) I've not been tempted to load it up with the 3% interest they offer.

I'm impressed with them taking the approach they have regarding billing and for that I have rewarded them with my custom. I know the "risks" and I believe them to be minimal compared to the reward of having a very clear simple bill once a month and fixed prices for a year, at the end of that 12 months I will see what they offer and re-evaluate.

Cancelation fees dont really bother me to be honest as I cant be bothered with the whole "rate chasing" thing, I'd rather do my homework and go with whatever I consider to be the best thing going forward, that said, I'm not loyal either, if there is a better offer available at the end of my Ovo contract I'll go for it obviously.

Premier_2

MillicentBystander wrote: »

... I would put money on just a tiny %tage of their customers knowing anything about this...

Saw a lettter delivered today from Eon date January 2011 advising of their price changes effective 4th February 2011.

The clause is stated in that letter where it discusses discounts applicable.

Of course, I couldn't possible comment on how many people actually read such notifications, even though the envelope is marked

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