Switching to fixed deals and confusion at what we're really looking for

I made a very similar post 2-3 years ago, and whilst I somewhat got it, from the responses, now in the same position, a few years later, I feel exactly as I felt then. Basically just definitive clarification needed most likely for my own stupidity.


Assuming;


we're looking to switch to another fixed deal, be it 1 or 2 years, from an existing fixed deal that's coming to an end, just like pretty much everyone else.


Every comparison site, including mse energy club, will do all the calculations then essentially list them by the cheapest first. However, is it me or is it that the cheapest is merely the cheapest based on the estimated annual/monthly direct debit?


Why are they not compared by what these deals actually charge as unit rates/standing charges? Are these not the rates that not only matter but are what are actually fixed. The estimated DD's are not fixed, they will be recalculated, credited or debited as you supply actual usage.


Looking through what's listed as my cheapest energy club offerings and actually checking the tarrifs shows the issue at hand.


What am I missing here? Is it because I'm not supplying actual usage figure versus estimated? Does that even matter if whats fixed in these deals is the unit rates and standing charge? At the end of the day it's all going to be calculated of those, so why are they not listed by those rates as the cheapest?
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  • Robin9
    Robin9 Posts: 12,055
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    However, is it me or is it that the cheapest is merely the cheapest based on the estimated annual/monthly direct debit?




    What am I missing here? Is it because I'm not supplying actual usage figure versus estimated?

    Why can't you provide actual consumptions ?
    Never pay on an estimated bill
  • Gerry1
    Gerry1 Posts: 9,891
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    edited 17 August 2019 at 8:37PM
    The ratings are listed in order of the total annual cost, which includes kWh, standing charges, discounts and VAT, based on the consumption you have quoted. And of course, that's what matters. Unless you can find a Monthly Variable Direct Tariff (E.On offer this) then the monthly DD will usually be 1/12th of the annual amount.

    However, in reality the DD can then vary because your usage may vary. Some suppliers also like to increase the DD a bit so that they won't suddenly have to tell you there's been a shortfall. That's understandable to some extent, but it also allows them to build up a credit balance that helps their cashflow and earns them interest.

    If your DDs haven't covered your actual usage for some months then the DD can show a double rise, one to pay off the arrears and another to reflect your higher usage. Many people get confused by this: they think their DD amount will always be the same, like council tax, property rental or all you can eat broadband, but it isn't: it's Use More, Pay More.

    So just look at the annual kWh and the annual cost, and ignore the DD amounts. Similarly, ignore any claimed savings because they assume you don't switch at the end of a fixed tariff.

    Another point you're missing is that the ratings order will depend on your consumption. If you used 1kWh per year on a gas tariff with no standing charge then they'd be the cheapest even if their energy cost £1/kWh. But if you used 20,000kWh p.a. then they'd be the most expensive.
  • Robin9 wrote: »
    Why can't you provide actual consumptions ?


    I don't have them to hand but would it make a difference and how? Whether the rate is estimated or accurate it's calculated off all the points Gerry mentions below which are generally fixed.
  • Gerry1 wrote: »
    The ratings are listed in order of the total annual cost, which includes kWh, standing charges, discounts and VAT, based on the consumption you have quoted. And of course, that's what matters. Unless you can find a Monthly Variable Direct Tariff (E.On offer this) then the monthly DD will usually be 1/12th of the annual amount.


    That's pretty much what I'm saying, I think. Except, all these comparisons only show annual/monthly cost, unit rate, standing charge. I'm guessing the discount is either specific to each offering or isn't shown, if for example it's calculated into the monthly/annual cost but not shown against the unite/standing rates? The VAT would surely be the same on them all?



    Gerry1 wrote: »
    However, in reality the DD can then vary because your usage may vary. Some suppliers also like to increase the DD a bit so that they won't suddenly have to tell you there's been a shortfall. That's understandable to some extent, but it also allows them to build up a credit balance that helps their cashflow and earns them interest.




    Yup, totally get this.

    Gerry1 wrote: »
    If your DDs haven't covered your actual usage for some months then the DD can show a double rise, one to pay off the arrears and another to reflect your higher usage. Many people get confused by this: they think their DD amount will always be the same, like council tax, property rental or all you can eat broadband, but it isn't: it's Use More, Pay More.


    Again, totally get it.

    Gerry1 wrote: »
    So just look at the annual kWh and the annual cost, and ignore the DD amounts. Similarly, ignore any claimed savings because they assume you don't switch at the end of a fixed tariff.


    Ok, don't get this. Annual kWh? This is the daily fixed rate for whatever it shows, energyclub only shows this as a unit rate, possibly only for gas and not for electric in the tariff breakdowns, seems to be for every offering. What are you referring to when you say annual cost? Is this not the same as DD? just annually. Or reflective of actual usage?

    Gerry1 wrote: »
    Another point you're missing is that the ratings order will depend on your consumption. If you used 1kWh per year on a gas tariff with no standing charge then they'd be the cheapest even if their energy cost £1/kWh. But if you used 20,000kWh p.a. then they'd be the most expensive.


    That's what I mean though, when I look through the order of listings based on standing charge and unit rate, it just doesn't add up. I'm seeing companies with much lower estimated costs (monthly/annual) than listings deemed more expensive but actually have BOTH lower unit rates and standing charge rate. Even where there are no listed differences in bonuses or other perks.


    So I was about to delete everything I've written but will leave it in for next years self-clarification. I have just established the error of my ways. It would seem I have inadvertently seelcted all tariffs not fixed. Which is why I'm seeing big discrepancies in variable versus fixed rate tariffs.



    My bad, but thanks for giving me the time and explaining.
  • nic_c
    nic_c Posts: 2,928
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    Every comparison site, including mse energy club, will do all the calculations then essentially list them by the cheapest first. However, is it me or is it that the cheapest is merely the cheapest based on the estimated annual/monthly direct debit
    Yes they tend to list it in the cheapest overall cost, because for most people that's what is useful, they want to know what they will likely pay
    Why are they not compared by what these deals actually charge as unit rates/standing charges? Are these not the rates that not only matter but are what are actually fixed. The estimated DD's are not fixed, they will be recalculated, credited or debited as you supply actual usage.
    DD is based initially on the figures you give and changed if your actual use differs. This would be the same irrespective of what deal you go for if your actual usage is different. Listing deals in terms of unit rates and standing charges would be pointless as what would you put first, lowest unit rate or lowest standing charge? It could mean people choose the deal that is not the best for them - lets say they checked the unit rate of two suppliers and went for the cheapest, they may end up paying more over the year because the cheaper unit rate may have a dearer standing charge.

    You could take the unit rate and standing charge of each one and plug your figures in to see what it costs and then do the same for the next, but that's what the comparison site does when it shows you the annual cost and DD (which is the annual cost divided by 12).
    Looking through what's listed as my cheapest energy club offerings and actually checking the tarrifs shows the issue at hand.

    What am I missing here? Is it because I'm not supplying actual usage figure versus estimated?

    You pay for what you use, so if you estimate 5000kWh of electric and 10000kWh of gas and turns out to be you actual use, then you will end up paying what is predicted. If you burn through more than what was predicted they you end up paying more. Giving as accurate figures as you can, eg using last years actual to predict next year, should roughly indicate which is better.

    If next winter is a lot colder than last ad you put heating on more, you may end up paying more, or if its a lot milder and you could pay less. Maybe your children are older and now have a game console each this year rather than sharing last year, so your figures go up. DD going up during the plan does not mean the comparison site got it wrong but that your actual use differed to what was given when you signed up.

    Of course DD may go up mid plan because they base it on the next 12 months use, which may include time after your fix has ended and you are on a higher rate, this has nothing to do with comparison sites though.
  • nic_c
    nic_c Posts: 2,928
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    That's what I mean though, when I look through the order of listings based on standing charge and unit rate, it just doesn't add up. I'm seeing companies with much lower estimated costs (monthly/annual) than listings deemed more expensive but actually have BOTH lower unit rates and standing charge rate. Even where there are no listed differences in bonuses or other perks.

    So I was about to delete everything I've written but will leave it in for next years self-clarification. I have just established the error of my ways. It would seem I have inadvertently seelcted all tariffs not fixed. Which is why I'm seeing big discrepancies in variable versus fixed rate tariffs.
    Care to give examples? The fixed/variable shouldn't affect which is cheapest as surely the variable is based on current cost and has to assume it doesn't vary as it's not a fortune teller! If you include cashback then it could be that the cheaper rate is listed lower as it would cost you more after cashback taken into account.
  • Gerry1
    Gerry1 Posts: 9,891
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    edited 18 August 2019 at 11:58AM
    Glad you now have a better understanding ! To summarise, the present system is flawed (well done, Ofgem) because the so-called savings aren't based on real life.

    Imagine you're with Pink Energy on a fixed tariff costing £1,000 p.a. (assuming your usage turns out to be what you expected). You have six months to go and £500 still to pay, and if you do nothing they will then roll you on to their standard tariff which costs £10,000 p.a.

    Blue Energy have a fixed tariff that costs £5,000 p.a. Under Ofgem's weird rules, Blue can claim that you'd save £500 ! In theory that's true because in the next 12 months you'd have paid £5,500 to Pink (£500 on existing fixed tariff + £5,000 on future standard tariff) but 'only' £5,000 to Blue. But in reality that 'saving' is mythical because you wouldn't have let Pink roll you on to their rip-off standard tariff. Blue would actually be far much more expensive because you'd be switching from a tariff costing £1,000 p.a. to one at £5,000 p.a. !

    So that's why you should always ask 'What's the full amount you would charge me for the XXX kWh I expect to use over the next 12 months?', ignore any claims about savings, and compare this to what you'd pay if you didn't switch.

    Of course, I've ignored winter / summer consumption variations, exit fees and the switching delay, but you can see why the annual kWh cost is the figure to compare.

    In theory the DD should just be 1/12th of the annual cost, but it can go pear shaped if your usage isn't what you expected. You may build up arrears so they may have to hike to DD to claw it back, and they can also play safe by setting the DD higher than it strictly needs to be. This can then be confusing if you make future comparisons based only on a 'wonky' DD rate.
  • nic_c
    nic_c Posts: 2,928
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    Maybe it is OfCom, but it's also the fault of the suppliers and switching sites too, who take advantage of it. If you are on a cheap deal that is ending and you are looking at comparison sites most will base it on staying 12 months with your existing supplier i.e. after the fix going on to their standard variable rate, this way it looks like you will save money by switching, even if your current deal is actually cheaper because they include SVR. The MSE CEC at least allows you to compare tariffs to your current tariff as an option instead of the OfCom normal.

    Like in your example when you are coming towards the end of a fix, your supplier will tell you to switch to a tariff that will save you money (when compared to SVR rather than it might be more than your current deal). They also may increase your DD as part of a review assuming you will not switch away and go onto their SVR.
  • Do we generally find the comparison sites giving the best/better deals?


    Whilst I understand, for example, it wouldn't be advisable to calculate a cashback amount from a 3rd party into the equation, places like TCB and quidco generally offer larger sums but I'm guessing they don't have access to the better deals as shown on comparison sites.



    Wondering if anyoe factors other offerings outside of comparson sites and if it's even worth checking?
  • nic_c
    nic_c Posts: 2,928
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    The suppliers you get cashback from give a kick back, cashback sites give some of that back, so does CEC to be fair. The cashback tends to be standard £12.50/£25 when switching energy through either quidco or CEC, not larger via quidco
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