E.ON press the re-set button

SnowMan

backfoot wrote: »

I don't want more tariff options and nor does Ofgem,so I prefer a simple 1/12th DD option, that we all understand.

Of course that is the other major point that I overlooked to mention in my own response.

We should be looking to reducing the number of tarriffs not increase them.

JimmyTheWig

backfoot wrote: »

As I said,it is the cash flow implications rather than the interest loss that concerns me most.

Then put a value on this.
How much would you be happy to accept as a discount in order to be inconvenienced from a cash-flow point of view.

backfoot

JimmyTheWig wrote: »

Then put a value on this.
How much would you be happy to accept as a discount in order to be inconvenienced from a cash-flow point of view.

I am not sure my personal evaluation of a discount for cash flow inconvenience is relevant. My situation is different to other people.

If a person has no spare capacity in their budget to find cash for a sudden hike or premium payment, it is irrelevant as they will have to borrow funds on overdraft rate, which will totally dwarf any discount.

If you insist on a figure for those situations let's say 25%.

It's bad enough paying gas and electricity at the rates they are now without having to find another 20% to 60% more.

JimmyTheWig

I totally take your point, backfoot. (And I don't think they'll be offering a 25% discount!)

But to play devils advocate, the people you are talking about are exactly those who would be unable to switch suppliers if they had a negative balance. I know that they could pay the difference between 1/12ths and zero spring balance payments into a savings account so that they would always be able to pay off any negative balance if they wanted to switch. But to be realistic, the people you are talking about wouldn't do that.
Moving forward, if all suppliers did the same (I know you all hate that idea) and any credit balance from one was paid directly to another on switching then these people would always be able to switch. This would increase competition, and so (theoretically, at least) bring down prices.
I think it would be tough for these people to pay this for the first 6-18 months but I would imagine that given they had little choice they would cope. And from that point on there would be little difference between this and 12ths. Forever.

It reminds me somewhat of paying for a TV licence by DD. The first time ever that you set it up you pay double for the first 6 months. Then for the rest of ever you pay 12ths.

If you really don't like the idea then pay quarterly in arrears until you get round to spring, then go on to direct debit, which will be pretty much the same as 12ths.

DirectDebacle

E.On or any other supplier should be able to offer a choice of payment schemes to any of their tariffs should they wish. The only proviso being that any tariff where DD is either a tariff condition or an option, is that the 1/12th DD is the default payment method. Suppliers can then offer optional methods, e.g. E.On zero spring balance, incentivised or not.

Most customers understand the 1/12th scheme and it is easily explained. Alternatives to this can be fully explained and comparisons made between them. Customer choice is enhanced and households, where strict budgeting is necessary, are protected. It would prevent suppliers from offering tariffs where 1/12th DD scheme was not an option. It all becomes transparent and above board. It should not in itself lead to an increase in the number of tariffs.

The problem with E.On is they surreptitiously forced some customers into a payment scheme that, had they understood it, they would have avoided.

It would require little effort on the part of Ofgem to define the 1/12th DD scheme as the default method and require all suppliers to offer it. E.On could then still offer their current scheme, be free to fully explain it and not mis-lead anyone.

JimmyTheWig

DirectDebacle wrote: »

Most customers understand the 1/12th scheme and it is easily explained.

I totally agree with this and think it is the only downside with the zero spring balance method.

Incidentally, does anyone know why Eon have a three-month spring window? I think it would be so much easier to explain if all accounts had to be at zero on, say, 15th April. Or even in April on the anniversary date of joining (e.g. join on 10th July and have zero balance on 10th April).
I don't see what the benefit is to Eon in having the three months.

DirectDebacle

I don't see what the benefit is to Eon in having the three months.

Whilst we wait for E.On to explain that, I can only speculate. It gives them room to appease an angry customer who joined say Oct-Nov. Faced with a DD increase for an April zero balance, E.On could agree a reduction for a May or June balance. Who knows?

backfoot

JimmyTheWig wrote: »

I totally agree with this and think it is the only downside with the zero spring balance method.

I don't see what the benefit is to Eon in having the three months.

:eek: So you think up to 60% leap in DD was ok? Please tell me that was a typo.:)

3 months is used to manipulate/increase the amount of customers falling into short year recovery.

JimmyTheWig

backfoot wrote: »

:eek: So you think up to 60% leap in DD was ok?

How would that have compared to quarterly billing?

backfoot

Jimmy,

We are not really comparing the zero balance policy to quarterly billing. Eon have adapted the conventional DD scheme to their own version.

I thought you previously understood the objections, even if you didn't fully support them, from your own personal circumstances. Nevertheless, I will have one more go to answer your point.

On a quarterly billed basis paid in arrears, following a price rise of 18%, I would expect the customer to pay 18% more. What zero spring balance does is to accelerate that amount because it not only recovers the current consumption but takes into account that increase on future consumption and expects early settlement. That recovery rate is massive when the zero balance date is only a few months away. The reset doesn't address this at all.

I am not sure that I am going to convince you ,because you have it fixed in your mind that it is an imperative that zero at April is ideal. I don't share that view whatsoever, because I can see the impact it generates.

Seasonality in itself will level off the balance naturally towards the lower consumption months but there is nothing sacrosanct that it must be zero at April. If you think it is then Eon have successfully brainwashed you.;)