Termination Fees - OFGEM Response.

backfoot

https://forums.moneysavingexpert.com/discussion/3369410=

Many posters were interested in the above thread concerning Termination Fees on variable,discounted,guaranteed tariffs etc.

Although, most Suppliers have agreed to waive termination fees in the current round of price increases, others have not while some Suppliers treat the matter inconsistently.

I thought I would try and seek clarity from OFGEM. After all, they are the Regulator of such matters.

Here is the exchange:

Subject: RE: Rules Regarding Notification and Rejection Of Supplier Price Increases

Dear xxxxxxx,

I have a supplementary question concerning Termination Fees (condition 24.3 (c). )

It reads very clearly to me, that in layman's terms, that a Termination Fee cannot be charged if a customer gives the precribed notice of a switch to another supplier following a variation. i.e. a price increase. There does not appear to be any exceptions.

I am aware that a number of Suppliers have been suggesting that clause 24.3 (c) does not apply where a 'discounted to standard tariff' is the product. As, such a product is essentially still a variable tariff and is subject to price rises in the same way, I cannot see any logic for such an exception.

For example:

A supplier increases a variable contract by 1%. Then the termination fee is not payable on switching.

A supplier increases its standard tariff by 1%. The customer is free to switch without penalty.

A supplier raises its standard tariff by 20%, but it has also has 'discounted product' guaranteeing it will always be 2% below standard. The discounted product moves in line with standard also by 20%. (or some other amount)

Surely, there can be no different application of the termination fee in those circumstances?

I believe there needs to be clarification, as there is strong evidence that suppliers are making life difficult for customers trying to switch in the light of recent massive price hikes and levying large termination fees on top of the price increases.

I am happy to discuss this by phone to clarify any point but would also welcome a written response.

Yours faithfully,

OFGEM's response:

If a customer is on a fixed term deal with an early termination fee, they will not have to pay a termination fee if they notify their current supplier of their intention to switch on or before the day the change takes place (providing the losing supplier then receives a notification from the new supplier within 15 working days).

However, the situation may be different if the customer is on a variable rate contract where the option to avoid any exit fee will be dependant on whether there has been a change in the contract terms. I would encourage you to have a look at the terms to which you agreed to or discuss the above with your supplier in order to establish what type of contract you are on. Ofgem does not have a direct role in resolving general complaints or enquiries. Energy suppliers are responsible for dealing properly with their own customers and are subject to strict complaints handling standards which the customer can use where they are not.

Yours sincerely,
xxxx
Consumer Affairs

I would welcome your input.

1. What should the next step be?
2. What response would you make?
3. Is there a collective feeling that this is worth pursuing?

I would welcome any views before posting my own.

jalexa

backfoot wrote: »

If a customer is on a fixed term deal with an early termination fee, they will not have to pay a termination fee if they notify their current supplier of their intention to switch on or before the day the change takes place (providing the losing supplier then receives a notification from the new supplier within 15 working days).[/FONT]

However, the situation may be different if the customer is on a variable rate contract where the option to avoid any exit fee will be dependant on whether there has been a change in the contract terms. I would encourage you to have a look at the terms to which you agreed to or discuss the above with your supplier in order to establish what type of contract you are on. Ofgem does not have a direct role in resolving general complaints or enquiries. Energy suppliers are responsible for dealing properly with their own customers and are subject to strict complaints handling standards which the customer can use where they are not.[/FONT]

We paid somebody for *THAT*???

Going out tonight (no, for *that* reason, it's only energy supplier's "a s s" I kick) so can't devote any time right now.

echoecho_2

Deleted as I obviously didn't read the first post properly- sorry!

Joyful

Sorry but Ofgems reply confirms what I believed. If I choose to pay a % less than the standard price rather than fixing my price I understand it may go up in line with price increases but will always pay X amount under the Standard. We as consumers cannot have it both ways. If this ever changes then the individual companies should have the right to back bill us on the standard price fom the start of the time we took up the discounted price.

I always make sure I read the small print in anything I sign up to. I wish others would do the same.

rjjps2

I agree joyful the contract or read to you states 2% below standard as long as the prices remain below this then to me the contract as not changed unless this dips below the 2%. I also agree with backbilling cancel termination fee in exchange for cancelling the discounted rate they have I know which one I would prefer

meherenow

Bah, this just makes me glad I managed to get my EDF mess sorted and now have it in writing that I won't be charged any extra.

Still leaves the companies open to charge 30% less for 1 month of a fixed (discounted from standard rate) deal then immediately inform you that the price is increasing 25%+ after 30 days (as long as it's within the, say, 2% that a lot of contracts state it will be below, hence probably making it immediately uncompetitive). LOL, not a good loophole by the sounds of it

dogshome

Typical Ofgem - However probably without realising it, they have given firm guidance on an area they were not specifically being asked about.

The 1st para. of their reply lays out the notice terms of a Switch triggered by price rises, which individual suppliers at present say is anywhere between 7 and 20 days.
But Hey Ho, Ofgem have ruled that the customer has the entire period between recieving their individual notice of the increases until the day before the rises take effect, with the 15 day window for Switch completion, running from the day the customer does give notice, even if the notice isn't given till the very last day.

Thank you Back foot I've printed out Ofgems reply and pinned it on the wall

We all know the suppliers have been pushing the envelope with the insistance that a guarentee of price rises being limited to 2% below the Standard tariff, allows them to charge exit fee's to "Switching because of Price Rise customers"

The whole thing requires clarification by a Court, but that is the last thing the suppliers want to happen - So the answer is to threaten a Small claims
action and watch them back-off

jalexa

backfoot wrote: »

https://forums.moneysavingexpert.com/discussion/3369410=

I would welcome any views before posting my own

A somewhat "useless" response from a "consumer useless" organisation, but did you (we) expect them to own up to their own "snafu"?

Neverthess there is no response that a wedge can't be driven into. The reply is a hostage to fortune in that it relies not on Ofgem to deliver consumer fairness but the suppliers of a disparaged supplier body.

While in a sense a "waiver" achieves a satisfactory outcome I have not yet seen comment that, for example, Scottish and Southern brands (the brands behind "fixed discount" no less), have implemented a waiver - and successfully communicated it to every email author and customer adviser.

It think it is saliant that supplier emails have described "guaranteed discount" tariffs as "variable". By not recognising that (variable) "guaranteed discount" tariffs have exactly the same consumer protection as err..... "variable" tariffs, Ofgem has created a rod for their own back and put Consumer Focus in an invidious position.

Actually it is a "great" reply, with plenty of scope for "mischief making", exactly the type of reply I love to get from energy suppliers (or banks) in response to a complaint.

Well done.

backfoot

Joyful wrote: »

Sorry but Ofgems reply confirms what I believed. If I choose to pay a % less than the standard price rather than fixing my price I understand it may go up in line with price increases but will always pay X amount under the Standard. We as consumers cannot have it both ways. If this ever changes then the individual companies should have the right to back bill us on the standard price fom the start of the time we took up the discounted price.

I always make sure I read the small print in anything I sign up to. I wish others would do the same.

I know you genuinely believe the above. The view is based on a you have given me something so you are entitled to tie me into the contract and penalise me for leaving.

It is worth pointing out that an enticement of a 1-2% guarantee is not much of concession (£10 to £20 on a £1000 bill).Yet the penalty typically is £60.

The issue is one of law. Ofgem haven't adressed it at all in their reply.They have preferred to dodge the real issue and the anomolies,which I gave examples of. Hiding behind a trust that a Supplier or it's Customer Service front line are experts in Contract Law is beyond a joke.

Then if you don't like it,you can refer it onward to Consumer Focus is neither likely to test or understand the principles.

I agree with dogshome that only in law could the matter be truly tested. The issue at law is whether there has been a price variation giving rise to a contract change.It seems irrefutable to me that there is a price variation, whatever weasly words have been used to dress the contract up.Alongside the Licence Conditions which make no exemptions, I think Ofgem have simply avoided answering the issue.

Interestingly,I thought there would be much more feedback. It makes me wonder why I should bother.I am not personally affected and have simply tried to pursue it on the grounds of Customer interest and fairness.

It should be Ofgem's job to cover this customer interest but it ends up with Customer's having to fight them to get anywhere.Hard work indeed.:(

backfoot

Following the last correspondence from OFGEM ,I wrote another persuasive letter to them.

I have today received the following reply and I am very pleased to say that this matter is now clarified by an open letter from Ofgem to Suppliers.


Dear Mr

Thank you for your further email. I trust that the following will be helpful.

Ofgem considers that the “price” itself is a term of the contract for the purposes of our licence conditions and therefore any price increase which is at the discretion of the supplier (including discounted tariffs linked to standard tariffs) is caught by the notice requirements SLC 23 (and all the applicable protections, including the prohibition on termination fee).

Ofgem has published today an open letter on this matter (copy attached) and considering this as part of Retail Market Review proposals.

jalexa

backfoot wrote: »

Ofgem considers that the “price” itself is a term of the contract for the purposes of our licence conditions and therefore any price increase which is at the discretion of the supplier (including discounted tariffs linked to standard tariffs) is caught by the notice requirements SLC 23 (and all the applicable protections, including the prohibition on termination fee).

Ofgem has published today an open letter on this matter (copy attached) and considering this as part of Retail Market Review proposals.

Well done:beer:

Pity Ofgem were asleep when "deferred discount" was invented either intentionally to circumvent regulations and/or to virtually "guarantee" a placing at the top of a Consumer Focus accredited comparison:(