Existing customer only fixed deals

northernstar007

pochase said:

No, the supplier will have hedged the cost for the fix, so they will not make a loss here.

This is the reason for the high exit fees, if the prices would come down the suppliers would still have to pay the high rates they hedged for.

so who is paying for the cheap deals, say if you fixed in at 8p kw gas and its being priced at 16p and it was trading at 4p when signed up ok they have covered themselves upto the 8p but still 8p loss no matter how u cover it up

pochase

They are buying the energy required for your contract at this unit rates 1,2 or 3 years upfront. They are fixing the price so they can deliver at the price they have offered you.

Disadvantage is that they have to pay the high price, even if the market price comes down. Of course they don't know what you will use, but they will also not do the hedging just for your contract, they will do it for all on this tariff.

This also means they have to charge you exit fees. Otherwise everybody would exit the tariff if the prices come down, but hey still would need to pay the high cost and buy the energy for the agreed price.

In your example they will have fixed the price at lets say 6p (don't forget the unit rate is not just the cost of the energy) for lets say 2 years. They will have to pay the 6p no matter what the real market price will be.

They are doing the same to cover variable rates, but for a shorter time as the price will adjust when the new cap is active.

Bulb will be losing money as they are not allowed to hedge/prepare for higher prices. They have to buy the energy for their customers when it is needed at the current price.

Of course that whole scenario is still dangerous. At least one energy supplier went bust last year because the company their hedges were with went bust.

macman

Mstty said:

northernstar007 said:

people thats on cheap fixed prices are the suppliers making a loss?

Yes if their fix is below the current price cap, as there is approx 2% profit in the price cap.

Only if they didn't hedge. That's why 30+ suppliers have gone-they didn't have the capital reserves to hedge for the long term fixes they were offering. And gambled that prices would be relatively stable.
The Big Six, as the legacy suppliers, would have had a high proportion of customers on SVT (the 40% odd of UK customers who have never switched). So they have been less exposed to losses from fixed tariffs than the newer providers for whom their customer base were all switchers. Very few switchers in recent years were switching to an SVT tariff.

northernstar007

so anyone on a cheap deal all the suppliers will be using up old cheap purchase orders you could say lol

macman

Unfortunately most of the cheap fixes were contracted last Autumn, so many are ending around October, at the start of the heating season.

Mstty

macman said:

Mstty said:

northernstar007 said:

people thats on cheap fixed prices are the suppliers making a loss?

Yes if their fix is below the current price cap, as there is approx 2% profit in the price cap.

Only if they didn't hedge. That's why 30+ suppliers have gone-they didn't have the capital reserves to hedge for the long term fixes they were offering. And gambled that prices would be relatively stable.
The Big Six, as the legacy suppliers, would have had a high proportion of customers on SVT (the 40% odd of UK customers who have never switched). So they have been less exposed to losses from fixed tariffs than the newer providers for whom their customer base were all switchers. Very few switchers in recent years were switching to an SVT tariff.

Oh the good old days of selling cheap and buying high lol

I suspect some of the big companies have still fell foul and their hedging, plus complaints, plus poor management have meant they don't make any profits.

Chrysalis

I assume there is a process for customers to join who are not leaving another supplier though right?

So e.g. someone moving into their own home after previously living with parents.  By default they have no supplier.  Or do they just inherit the previous supplier used at the property?  I cannot remember given I havent moved for nearly 20 years.

[Deleted User]

Chrysalis said:

I assume there is a process for customers to join who are not leaving another supplier though right?

So e.g. someone moving into their own home after previously living with parents.  By default they have no supplier.  Or do they just inherit the previous supplier used at the property?  I cannot remember given I havent moved for nearly 20 years.

Yes they do.

pochase

Chrysalis said:

I assume there is a process for customers to join who are not leaving another supplier though right?

So e.g. someone moving into their own home after previously living with parents.  By default they have no supplier.  Or do they just inherit the previous supplier used at the property?  I cannot remember given I havent moved for nearly 20 years.

They have a supplier the moment they move. They are on a deemed contract with the supplier who was supplying the property. Deemed contract is the same as a SVT.