Fixed Price Contracts - A Marketing Ploy ?

backfoot

It's a fix isn't it ?

Let's get you all in a lather because prices are completely out of control (which they are). Then we will make up a marketing product to get you to pay the anticipated increase in advance.

They jump on the bandwagon with each Supplier competing to offer short term fixes of around 12 to 14 months. By the time you have switched it will be around the year mark and you pay around 10% more now for the privilege. You may break even at best but you are happy and it doesn't feel quite as bad because you did something about it.

Then the longer term fixes. Good concept. Buying a tranche of capacity where the Supplier can bulk buy at best price. The payback should be a preferential rate for those in the club.

Aaah but have you noticed it's not like that !:eek:

You aren't getting the payback at all. You are simply still paying huge premiums to the current variable price. 16% to 25% depending on the term. When you crunch the numbers and think about it, this will mean the variable price will have to rise by nearly double that for it have been worthwile.:o

Essentially, you are now paying an even bigger amount in advance for the chance of breaking even.

Tactically, for the Suppliers and the Comparison site hangers on it's a great message. People are now so scared they are willing to accept double digit annual rises for the forseeable future. They have embedded that thought, sold as an apparent positive. Full page ads pushing fixes.

They aren't stupid. Beware their message. Do you trust them?

ihateyes

i agree.....
straightaway you are paying more than a variable for instance myabe upto 5%...... fo say 2 years....
so if price was to increase after say 12mths it needs to go by at 10.1% for you to be abe to say you have saved money by going onto fixed.... but look at the price rises, a large one is normally followed by a small decrease, or a small increase, not normally by another hugh one.....

brewerdave

Its all about timing ...but yes it is a slight gamble. I'm moving to a fix which is about 13% more than the best currently available variable tariff. Now on the basis of what SP and BG have done I'm expecting the best variable tariffs to rise to within 1 or 2% of my fix no later than next Spring - so the only way I'll lose is if prices fall or don't increase by 2% in the next couple of winters!!

macman

Not necessarily a gamble. I've just switched to EDF FSv2 from Ecotricity New Energy and BG Websaver 7. If I'd stayed with Eco and switched to BG Websaver 12, I'd be paying £108 more than the price to fix for 15 months. So unless variable tariff prices actually fall maybe 6-8% over that period, I'm still ahead.
Plus £20 cashback of course.

backfoot

macman wrote: »

Not necessarily a gamble. I've just switched to EDF FSv2 from Ecotricity New Energy and BG Websaver 7. If I'd stayed with Eco and switched to BG Websaver 12, I'd be paying £108 more than the price to fix for 15 months. So unless variable tariff prices actually fall maybe 6-8 8% over that period, I'm still ahead.
Plus £20 cashback of course.

Was that really the cheapest variable priced combination for you when you evaluated it? Eco + BG WEb 12?

backfoot

brewerdave wrote: »

Its all about timing ...but yes it is a slight gamble. I'm moving to a fix which is about 13% more than the best currently available variable tariff. Now on the basis of what SP and BG have done I'm expecting the best variable tariffs to rise to within 1 or 2% of my fix no later than next Spring - so the only way I'll lose is if prices fall or don't increase by 2% in the next couple of winters!!

No it will have to rise by more than 1- 2% to claw back the 13% extra you have paid for x number of months.

lowbrim

Normally I would agree but at the moment the fixed price tariff on NPower is the cheapest tariff of all, or will be after British Gas Hikes there prices in August and it is fixed until July 2012. I have just switched from Websaver 11 with BG through Quidco and got another £40 off.

macman

backfoot wrote: »

Was that really the cheapest variable priced combination for you when you evaluated it? Eco + BG WEb 12?

No, not at all, that would be the cheapest option without switching. I get a beneficial FIT's rate from Ecotricity, but the lower price from more EDF compensates for that.
My cheapest variable tariff would be EDF OS v10. That would be about £105 cheaper than the EDF fix at current prices. But factor in an imminent price increase and I think I've made the right choice.
A few months back I was totally cynical about fixed tariffs, now I've changed my attitude.

backfoot

I don't know what a FIT's rate is?

The correct comparison is to the lowest variable rates as the starting point.

Then obviously make assumptions about potential increases and timings depending on age of tariff and last increase. Obviously,such assumptions for price increases are probably sooner rather than later.

macman

Feed In Tariff (what I get paid for my microgeneration).
As I said, EDF Fixed Saver v2 is about 8% more than the lowest variable tariff (which happens to be another EDF product, Online Saver v10).
In the current climate I think that an 8% premium is an acceptable hike in order to lock down my bills for another 15 months.