Why are companies offering fixes to existing customers?

deano2099

This isn't a "why am I not eligible?" angry post or anything, I'm just interesting in the logic behind why we're seeing some companies offer (competitive) fixes for existing customers? As in, what's in it for them? There's no real alternative for anyone to switch to, so it's not about taking a short term loss to try and retain their custom. I'm also not talking about the rip off fixes some suppliers are offering that are well in excess of the predicted rises. It's the ones that are actually good value that MSE are suggesting are probably worthwhile. Do these companies know something we don't? (Presumably not, given the money they must be losing on the last lot of fixes when the cap went up much more than expected). Is it just to hedge their bets a little in case something unexpected happens?

I'm just curious as in the past energy companies offered good deals to essentially buy up market share, and hope people wouldn't switch away. Where there are the occasional 'good deals' now, what's the commercial benefit to the company for offering it?

[Deleted User]

I'd say that allowing existing customers to fix would improve the company's ability to hedge, but taking on large numbers of new customers is seen as a big risk.

pochase

We will see what is going to happen to Green Energy UK with them taking on a large number of new customers.

aoleks

there's nothing attractive about the tariffs they offer, they're all too expensive.

Aylesbury_Duck

aoleks said:

there's nothing attractive about the tariffs they offer, they're all too expensive.

People said that a few months ago.  Those look attractive now.

Astria

It's a low risk investment for them that may bring in more money than they could lose, which is why some fixed tariffs have a £200 exit fee, and the more expensive tariffs typically have less or zero exit fees, IMO.

For example, the Sainsbury's V20 tariff was always likely to make them a profit Oct - Dec depending on estimations, but now the estimations for next year have gone up they've withdrawn it and brought out V21 with even higher charges.

I suspect the big motivation though is smart meters - I bet every new tariff has the wording "You agree to have a smart meter fitted" somewhere in the T&Cs and they'll make their money back in a few years when adoption is high enough and we are forced onto TOU tariffs.

Krakkkers

What is a TOU tariff?

[Deleted User]

Krakkkers said:

What is a TOU tariff?

Time Of Use - having a different unit price at different times of day, like a much more complicated (and dynamic) version of Economy 7.

MWT

Astria said:

It's a low risk investment for them that may bring in more money than they could lose, which is why some fixed tariffs have a £200 exit fee, and the more expensive tariffs typically have less or zero exit fees, IMO.

The exit fees price the risk they have taken in hedging to be able to offer those prices...

If the energy prices fall and customers want to leave or switch tariff, the supplier still has to buy the energy at the high price that they originally hedged at...

The_Green_Hornet

pochase said:

We will see what is going to happen to Green Energy UK with them taking on a large number of new customers.

Do we know how many actual new customers they have taken on?

littleteapot

aoleks said:

there's nothing attractive about the tariffs they offer, they're all too expensive.

Exactly what people told me when I took a 2 year fix from EDF in April 2022!

I presume the reason they were offering fixed tariffs to existing customers only was based some the following factors:

1. Existing customers are a 'known risk' from their payment history. I don't know whether or not they offered the same fixes to all existing customers, but I would not expect them to offer them to customers with a poor payment record.
2. By getting long term commitments from known reliable customers, they can confidently buy a tranche of energy in advance to cover those customers predicted usage, giving financial security to the supplier. This would be an example of 'good debt' on the company's books.
3. The exit fees were generally quite high to deter customers from exiting unless there was a very large drop in prices with other firms.