Energy price cap freeze on a fixed tariff

CSH1

I shall see what the details are on Thursday and if it looks like I will be paying over the odds for staying on my fixed rate I will pay the exit fee of £150 and go onto the new cap, I haven't spent too much over so far as I fixed at about 36% over the April cap and it has been summer use so quite low.  It would be nice though if people on fixed rates were even mentioned in all of the news reports about this, it is all strangely absent of any mention of it.

xzibit

PennineAcute said:

I agree that people like myself took a gamble when we fixed.  However, the reasoning of some people does not wash.

In 'normal' times, if I had fixed and then some months down the line prices fell, the current fixes would be lower than the SVT - so I could just move to another cheaper tariff with my supplier BG.

If the proposed October rises do not go ahead, due to a heavy Government subsidy, then I cannot move to a cheaper tariff, as they will still be greater than the subsidised SVT rate.

In some respects, if this does go ahead before October, I am being vicitmised for trying to be responsible.

Just go back to the SVT in that case?

I fixed for the first time ever (out of fear) mid August and prior to taking the fix BG advised me on chat that there would be no penalty to drop back to the SVT at any time, as long as I don’t change suppliers. 

[Deleted User]

I've said it before, and I will repeat it again.  Taking a fix was like buying insurance against a price rise.

If you don't have a car accident in a year (i.e. prices don't go up), you don't get a refund of your insurance premium.  However, if you decide to get rid of your car and don't need the insurance (i.e. prices are no longer at risk of going up), you can cancel the policy (i.e. move onto the SVT).

jimexbox

[Deleted User] said:

I've said it before, and I will repeat it again.  Taking a fix was like buying insurance against a price rise.

If you don't have a car accident in a year (i.e. prices don't go up), you don't get a refund of your insurance premium.  However, if you decide to get rid of your car and don't need the insurance (i.e. prices are no longer at risk of going up), you can cancel the policy (i.e. move onto the SVT).

I'm not sure I see the analogy with car insurance. 

We all new in April that a price rise was absolutely guaranteed in October, absolute fact. It was merely by how much.

Those who have paid above Aprils cap (not myself), knowing that after October their sacrifice would pay off, will be slightly miffed. 

spot1034

A lot of work will be going on behind the scenes in consultation with energy companies and I'm sure the issue of customers on fixes will be on that agenda. One thing which we haven't mentioned here is that if things pan out as is beginning to look likely, suppliers will be bombarded with calls from people wanting to end their fixes and go back on to the SVT - I don't think many will be able to do it automatically without speaking to someone either on the phone or via online chat. That will mean a huge amount of work for suppliers.

Sea_Shell

From a consumption point of view, I think any capped cap, needs to at least be somewhere above the current one.  Maybe the £2800(?) that was forecast when the original package of help was announced?  

Too many people will otherwise carry on as they were and not change their behaviour... making power cuts more likely over winter.

It would be counter productive to make it too affordable.

Mstty

[Deleted User] said:

I've said it before, and I will repeat it again.  Taking a fix was like buying insurance against a price rise.

If you don't have a car accident in a year (i.e. prices don't go up), you don't get a refund of your insurance premium.  However, if you decide to get rid of your car and don't need the insurance (i.e. prices are no longer at risk of going up), you can cancel the policy (i.e. move onto the SVT).

You may have said it before, and perhaps the lack of support meant you need not say it again?

It's nothing like car insurance.

MWT

spot1034 said:

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?

The way the current Ofgem rules work, the supplier is obliged to offer a customer on an expiring fixed tariff their cheapest comparable fixed tariff, and they are also obliged to tell the customer about their cheapest available tariff, in recent months that was the SVT..

So no, there should not be anybody who was not offered both choices, but there will be plenty of people who did not read what they were given and picked a fix because that is what they have always done...

If you want suppliers not to offer expensive fixed tariffs to those already on a fixed tariff you would have to change the Ofgem rules.

... not sure you can do much about those who were 'hoodwinked' by not actually reading what they were given...

TheBanker

jimexbox said:

[Deleted User] said:

I've said it before, and I will repeat it again.  Taking a fix was like buying insurance against a price rise.

If you don't have a car accident in a year (i.e. prices don't go up), you don't get a refund of your insurance premium.  However, if you decide to get rid of your car and don't need the insurance (i.e. prices are no longer at risk of going up), you can cancel the policy (i.e. move onto the SVT).

I'm not sure I see the analogy with car insurance. 

We all new in April that a price rise was absolutely guaranteed in October, absolute fact. It was merely by how much.

Those who have paid above Aprils cap (not myself), knowing that after October their sacrifice would pay off, will be slightly miffed. 

Car insurance isn't the best example, because it's mandatory. So as well as protecting yourself from the costs of your car being in an accident or stolen, you are protecting yourself from being prosecuted. A better example might be insurance that's completely discretionary like home contents cover. There you are accepting a higher (than zero) monthly cost, in order to avoid a potentially much larger cost.

People who signed up for fixes did the same thing - they traded the uncertainty of future prices against paying more in the short term. The fact that prices may move in the opposite direction to expected due to government intervention doesn't mean they've lost out - they still have the certainty of prices at the level they agreed. They will pay exactly what they would have paid without government intervention, in the short term.

Of course if the £400, which they may have factored into their calculations is removed, that would be unfair. And if the cost of repaying the proposed loans is added to their electric bills, that would be unfair. Perhaps no more unfair than the cost of bailing out customers of suppliers who failed being added to my bill is, though. 

Trynsave2

[Deleted User] said:

I've said it before, and I will repeat it again.  Taking a fix was like buying insurance against a price rise.

If you don't have a car accident in a year (i.e. prices don't go up), you don't get a refund of your insurance premium.  However, if you decide to get rid of your car and don't need the insurance (i.e. prices are no longer at risk of going up), you can cancel the policy (i.e. move onto the SVT).

Agreed. Taking a higher fix is buying certainty over any future rise in price over the length of time involved and so many people fixed because in the absence of any offer of help they couldn't afford not to.

The issue is that prices have indeed risen as predicted so those, and again I don't me mean me personally, who paid a premium to fix should be better off as a result of that decision. If the market had swung the other way, I'd be joining you in saying that you can't have your cake and eat it and whilst it's unfortunate that you could be paying less, you opted to pay more for certainty.

However, that isn't the case. Prices rose and those that fixed should be better off as a result of their decision. If ridiculously late Govt intervention plays so that an informed decision is now a poor one then that's not right. Again not me, but many on fixes can't afford them either and it's not just the exit costs by the way. Even though it's been summer, many have been paying higher rates for months.

And finally, it isn't just about who wins or who loses now. It's about unsustainable energy usesage that needs to be cut. It's about the longer term cost of any bailout on the public purse. And it's also about public perception that the Government are there to catch us and protect against financial harm. That personal responsibility for one's own budget and life can be given to the state to control. That those who try to fend for themselves are punished.