Opposition proposals to freeze the price cap - fair for people who have fixed?

pochase

Mstty said:

Let's not forget the energy suppliers are pushing for the 2 year price cap freeze and they are not financially inept.

If those that have fixed have to cancel their fix contracts and pay exit fees to cancel them and move to the SVR/T this has the following benefits to those energy suppliers

1) pocket the exit fee

2) the hedged energy they bought to supply the fixes is now sold at the current price cap rate and they will rake it in through the long term loans.

I wonder why they are pushing so hard for this🤔

Completely agree with the second argument. The exit fees are to cover for the situation that they have hedged rate x, now the energy price decreases and user leaves for SVT, but they still have to pay the high amount to buy the energy earmarked for this user.

If we have now suddenly a frozen cap and the user leaves, they are buying the energy earmarked for the user at lower cost than average market price, so they will make a profit here.

I would not expect to get an overpayment already made due to fix back, but realistically they would be easily able to do so through the savings they will have buying energy cheaper due to the hedge.

[Deleted User]

I'm now wondering what justification some of the current remaining suppliers have for keeping an exit fee for any fixed tariffs.   Are there arguments for retaining an exit fee other than as a means of milking the customer.  Both my present fixed tariff (v7 Online DD) and future tariff (v18 Online DD) come with no exit fees.  Maybe Ofgem should consider a ban on exit fees on all tariffs.

pochase

[Deleted User] said:

I'm now wondering what justification some of the current remaining suppliers have for keeping an exit fee for any fixed tariffs.   Are there arguments for retaining an exit fee other than as a means of  milking the customer.  Maybe Ofgem should consider a ban on exit fees.

In the current situation everybody who has fixed up to mid July, and many of those after that will be winning if the predictions are true. So nobody will exit the fix. Hard to milk somebody on something that is not happening.

If the prices would come down we have the situation that the energy supplier and the customer both have bought an insurance, the customer that his rates will not go up, and the supplier hedged so that they will not lose money by providing the customer at the agreed rate.

If the prices come down and the customer goes onto SVT to save money, the supplier still has to but expensive energy for this customer, but can only charge at SVT rates.

The exit fees cover this loss the energy supplier would make otherwise. Otherwise they could also say they don't allow the customer to leave and they have to stick with the expensive prices. It is up to you if you want to take a contract with exit fee, but once you agree the exit fees are valid. You might have seen that for quite a while contracts with exit fees where less expensive rate wise.

If you take out a mobile contract for 2 years and you decide you want to change suppliers after a year what happens? Will your supplier tell you you  are free to go, or will they tell you to stick with them or pay up? 

Astria

[Deleted User] said:

I'm now wondering what justification some of the current remaining suppliers have for keeping an exit fee for any fixed tariffs.   Are there arguments for retaining an exit fee other than as a means of milking the customer.  Both my present fixed tariff (v7 Online DD) and future tariff (v18 Online DD) come with no exit fees.  Maybe Ofgem should consider a ban on exit fees on all tariffs.

Fixed rate deals used to be almost always (unless you went for a long term deal) cheaper than the SVT.but now it seems to be more like you guess what the standard price will be in a few weeks/months, and then take out a fixed rate or not based on research, luck, and other things. By the next price cap you figure out if you won (got a good deal) or lost (poor deal). Since you can effectively lose money from your decisions it's basically gambling and should be treated as such.  I'm surprised current fixed deals haven't been banned outright as such.

[Deleted User]

pochase said:

[Deleted User] said:

I'm now wondering what justification some of the current remaining suppliers have for keeping an exit fee for any fixed tariffs.   Are there arguments for retaining an exit fee other than as a means of  milking the customer.  Maybe Ofgem should consider a ban on exit fees.

In the current situation everybody who has fixed up to mid July, and many of those after that will be winning if the predictions are true. So nobody will exit the fix. Hard to milk somebody on something that is not happening.

If the prices would come down we have the situation that the energy supplier and the customer both have bought an insurance, the customer that his rates will not go up, and the supplier hedged so that they will not lose money by providing the customer at the agreed rate.

If the prices come down and the customer goes onto SVT to save money, the supplier still has to but expensive energy for this customer, but can only charge at SVT rates.

The exit fees cover this loss the energy supplier would make otherwise. Otherwise they could also say they don't allow the customer to leave and they have to stick with the expensive prices. It is up to you if you want to take a contract with exit fee, but once you agree the exit fees are valid. You might have seen that for quite a while contracts with exit fees where less expensive rate wise.

If you take out a mobile contract for 2 years and you decide you want to change suppliers after a year what happens? Will your supplier tell you you  are free to go, or will they tell you to stick with them or pay up? 

I understand the logic but cannot work out why the likes of Eon Next have no exit fees for either of the tariffs I'm currently on (or have signed up for from Oct 1st).  I feel as though I have bought myself what is effectively free insurance.  That was (and remains) an attractive feature of some (perhaps most I don't know) of the Eon Next tariffs. 

pochase

If you compare the unit rates for EDF and Eon in May and June you will find that the EDF tariffs with exit fees had cheaper rates. So you were gambling on the prices not falling and getting energy cheaper than the next guy who was unsure and went for get out of jail card, but paying more if he does not make use of the card.

Eon was betting on high prices and people not leaving and making them more money, while EDF took a more careful approach.

To be fair you would need to do calculations for different scenarios, how long do you need to stay on the tariffs before you have made up the exit fee with saving money from the cheaper deal.

Also EDF who have the very high exit fees are 2 year fixes, complete different scenario from a one year fix.

QrizB

Chrysalis said:

Pochase, I do suspect is either an energy investor or employee, looking at recent postings, will check out the other dude who liked your posts.

I'm Spartacus.

pochase

Astria said:

[Deleted User] said:

I'm now wondering what justification some of the current remaining suppliers have for keeping an exit fee for any fixed tariffs.   Are there arguments for retaining an exit fee other than as a means of milking the customer.  Both my present fixed tariff (v7 Online DD) and future tariff (v18 Online DD) come with no exit fees.  Maybe Ofgem should consider a ban on exit fees on all tariffs.

Fixed rate deals used to be almost always (unless you went for a long term deal) cheaper than the SVT.but now it seems to be more like you guess what the standard price will be in a few weeks/months, and then take out a fixed rate or not based on research, luck, and other things. By the next price cap you figure out if you won (got a good deal) or lost (poor deal). Since you can effectively lose money from your decisions it's basically gambling and should be treated as such.  I'm surprised current fixed deals haven't been banned outright as such.

Why should they be banned? I agree that you need to understand how they work and what the risk is, but why do you want to take the possibility to save money away from me just because there are people who don't understand that there is a risk and that you are gambling on a certain market behaviour.

Effician

QrizB said:

Chrysalis said:

Pochase, I do suspect is either an energy investor or employee, looking at recent postings, will check out the other dude who liked your posts.

I'm Spartacus.

No I'm Spartacus, ....................... oh ......wait........no , i'm Brian & so's my wife

[Deleted User]

Effician said:

QrizB said:

Chrysalis said:

Pochase, I do suspect is either an energy investor or employee, looking at recent postings, will check out the other dude who liked your posts.

I'm Spartacus.

No I'm Spartacus, ....................... oh ......wait........no , i'm Brian & so's my wife

And to cover all bases, I'd prefer to be addressed as Loretta from now on