Energy price cap freeze on a fixed tariff

The_Green_Hornet

If the reports in the papers are correct a price cap freeze for 2 years is going to cost a cool £100 billion, or approximately £3500 per household, which makes that initial £200 loan payable back over 5 years look like chicken feed, and who is to say that the energy crisis will be over by then.

This could be the biggest waste of taxpayers money since the Covid-19 furlough scheme.

[Deleted User]

sienew said:

If fixing always guaranteed the best deal, then energy companies would not be able to afford to offer them, they rely on the fact that some fixed deals have worked out worse for the customer, which is no different from when the first ever fixed deal was sold to what is happening now.

If we'd all fixed in summer 2021 for 3 years then even the big 6 would be going bust or asking for government help.

No. That isn't how it works. Until recently fixed deals have fairly consistently been the best deals and FAR better than the price cap. The energy companies generally do fixed deals by hedging, essentially buying energy today to sell to you over the 1/2/3 year fix so it's almost like locking in todays price for the fix period.

I'm comparing fixed with ordinary variable tariffs, not the default SVR at the cap that the big 6 used to charge if you didn't do anything.

Until this time last year, non-SVR variable tariffs were less than fixed, but vulnerable to sudden rises which was the attraction of fixed. Nobody "chose" SVR back then, it was the default tariff for those who didn't select anything.

I've found many a time variable tariffs in the past that have worked out cheaper for me than any fix available

Chrysalis

I guess this thread has taken the role of what I posted so will ask for my thread to be deleted.

My opinion is like a lot of political decisions a broad cap seems lazy, I think they should have done a tiered unit rate to encourage lower usage and it also would have made it much cheaper.

Second opinion is this should have been at the very least 9-10 months so people who fixed could exit, that was the reason I considered it ok for fixers as exiting is relatively pain free, but the 4 month proposal is such an awkward length of the freeze, anyone whof ixed cant make a rational decision for that on to exit or not.

Trynsave2

You are missing the point. Over the last 30+ years I have completely understood that fixing may or may not pay off. Even this year I kept my options open until I felt the right time had been reached for me to leap. Maybe a little late but my choice. Am I bitter that others fixed before me and secured a better rate? No. Am I appalled that any of us are paying such huge amounts for energy? Absolutely.

However, that's market forces for you and whilst I accept that not everyone can or will fix, for the Government not to consider the fact that many opted to fix as the lesser of two evils would be wrong. Leaving my personal circumstances aside, many will have accepted higher rates than they are comfortable with through fear of things getting even worse. These people were not looking to save money by fixing, but trying to avoid certain ruin. That is the difference between now and previous years.

The way I see it is that there are 3 main groups of people who stayed on the svr. The first are those with the resources to do so.  Fair play to them, but they need to own that decision and accept the higher costs. The second are the inactive. Too bad, they snoozed and got caught out. The final group are those without capacity or means to make a decision. That group needs to be supported by some level of Government intervention.

However, to freeze or artificially keep the cap low to compensate for groups 1 and 2 is not right. Most commentators agree that energy usesage needs to be reduced and that will never happen unless people feel the pain in their pockets. I get that a fall in discretionary income will hit businesses, but I would support intervention to help them survive especially as they are not covered by the cap. What I definitely don't want to see are those rock and a hard place fixers paying more for their energy by trying to do the right thing whilst those who ignored or dismissed the warnings pay less thanks to public outcry. 

jak22

Many took fixed deals over the last years - they were pretty good compared with variable but they were more like agreeing to stay with a given supplier for 12 months that to protect against huge rises which werent normal then. Until 12 months ago there were good fixes that are well below the current cap. 

But some of those deals were with suppliers that suddenly went bust and many got moved off good deals onto SVT.  But the advice towards the end of last year seemed to be to stick with SVT as it was 'like a short term fix'

In the new year prices started to rise and then with the conflict it looked like the October cap was sure to rise again and so fixes started to come back into fashion - even with high exit fees.

So the decision to take a fix this year has always been to mitigate the rising cap - and not just some gamble - so if the goal posts are moving to help those on capped SVT or business tariff then those on fixed should not be made worse off than with the promised £400.

[Deleted User]

Trynsave2 said:

Am I appalled that any of us are paying such huge amounts for energy? Absolutely.

100% agree with that.

What I struggle with is how to fairly give help to all customers. Let's say somebody bagged a 3-year fix last summer, fixed at a price we can only dream of right now, say 20p elec, 8p gas for example - do we exclude them from any further government help in terms of discounts? Should the government give more help to those that fixed well above SVT than those on SVT?

I'm interested in how you think this should work, it seems like you are just saying SVT people shouldn't get a freeze or do you mean something else?

Trynsave2 said:

The way I see it is that there are 3 main groups of people who stayed on the svr. The first are those with the resources to do so.  Fair play to them, but they need to own that decision and accept the higher costs. The second are the inactive. Too bad, they snoozed and got caught out. The final group are those without capacity or means to make a decision. That group needs to be supported by some level of Government intervention.

You've missed a group, of people who chose SVT because they think it will work out better in the long run.

Maybe they did the sums and saw marginal benefit in fixed, didn't like the trap of the massive £300 exit fees, thought the predictions are wrong, thought prices would have to come down at some point, optimistic that peace would be found in the East and gas supplies restored. Maybe some people thought that such big rises would inevitably come to a head.

It does feel like you are being a bit judgemental of these "groups" that you have defined. In particular the "Too bad, they snoozed and got caught out" group. 

What if they turn that on its head and say to you "too bad, you panicked and got caught out"

For me, the likes of £300 exit fees told me something, I've never seen them at that level. If prices aren't going to drop during the terms of the fixed deal then exit fees are pointless, they only become relevant when prices drop enough to make exiting worthwhile, and that's the bit that made me think that price drops are a genuine possibility and if they do occur they will be big enough to warrant a £300 exit fee. The predictions, which after all are just predictions, may turn out to be wrong.

Trynsave2 said:

 What I definitely don't want to see are those rock and a hard place fixers paying more for their energy by trying to do the right thing whilst those who ignored or dismissed the warnings pay less thanks to public outcry. 

You're not paying "more" for your energy though, you are paying what you agreed to in your contract. You paid for certainty and you've got that, no other guarantees were given.

I think you need to let go of this "right thing" concept and the "groups who ignored the warnings" as if one group deserve to pay more or less than another group. Nobody knew exactly what was going to happen, nobody knew there would be a war that affected our gas supplies just like nobody knows what the government are going to do yet.

Might all look different in a week, a month, or a year, might turn out you made the best decision to fix, but either way you have bought certainty in your energy price and you should feel happy about that. 

sienew

[Deleted User] said:

 You paid for certainty and you've got that, no other guarantees were given.

People chose a fix not because they wanted certainty, most chose a fix because it was the least bad option. From the forums here many people agreed to a fix that they couldn't really afford because even though they can't afford £3,000 they certainly can't afford the £3500 predictions.

spot1034

I'd suggest that the way this issue might get some traction would be to highlight the issue of people who were pretty much hoodwinked into arranging an expensive new fix upon the expiry of their previous one because it wasn't made clear to them that falling on to the SVT was an alternative. We all know this went on, and by the way, it'll be interesting to know how suppliers now intend to deal with this group of customers who've been overpaying for months, sometimes without any inkling that they are doing so. Will they just let the fixes continue and even try to sell them another one next time? Or will they contact them and suggest that the better option would now be to go on to the SVT, and somehow omit to mention that they could have had a cheaper deal all along?

If a reporter were to get to grips with this story they could then go on to say that there are also the customers who knew very well what they were doing, took a decision to take a fix which meant overpaying for a while to make a saving later, and have now had the rug pulled from under them.

Anyone know any financial journalists?  

TheBanker

Assuming the £400 stays in addition to whatever price cap changes are announced, could those on fixed rates not just use the £400 to cover their exit fees if they want to move to the capped rate? They'd still be better off overall.

Nobody has been stitched up or had the rug pulled from under them. Circumstances have changed - that's part of the risk you take when entering into a fixed deal. If prices had fallen for some other reason (imagine Russia suddenly became a friendly nation!) would people expect their fixed rates to be waived then?

Mstty

Someone will always lose out, that is life. Despite all the well intentioned advice both from Martin Lewis, MSE website and use as forum members (I took a fix as well) it appears it could end up being the wrong advice....."could"

What has been disappointing is that due to the Government turmoil and leadership this type of decision has been delayed so many people have felt pressured to fix before the monthly amount they are presented with becomes too high.(don't mention kWh price I am talking about the majority that still don't work on kWh price they still work on a monthly budget DD price)

All we can do is wait for what the plan is and the detail and all work out what to do from then.