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  • FIRST POST
    • MSE Archna
    • By MSE Archna 16th Feb 10, 5:38 PM
    • 1,874Posts
    • 6,140Thanks
    MSE Archna
    MSE News: Would you fix your energy costs for five years?
    • #1
    • 16th Feb 10, 5:38 PM
    MSE News: Would you fix your energy costs for five years? 16th Feb 10 at 5:38 PM
    This is the discussion thread for the following MSE News Story:

    "EDF Energy recently launched the Fixed Price 2015 deal that costs 1,197 a year for a typical family, according to price comparison site Energyhelpline.com ..."


    Read the full story:
    New five year energy fix rate


    These threads have been merged to avoid duplication. Thanks to Gerrard_8_lfc for the orignal post.
    Last edited by MSE Martin; 10-03-2010 at 6:20 PM.
    Report inappropriate posts: forumteam@moneysavingexpert.com




Page 1
  • Gerrard_8_lfc
    • #2
    • 2nd Mar 10, 5:14 PM
    EDF Fixed
    • #2
    • 2nd Mar 10, 5:14 PM
    Just to let people know who like long term caps I got an email in work today telling me about competitor news and EDF have just launched a 5 year fix. (2015)
    • Price Guaranteed until 2015
    • 7% Increase in price from EDF Standard
    • Exit penalties apply.
    • 100 fee per fuel, if they leave before June 2011
    • 75 fee per fuel, if they leave before June 2012
    • 50 fee per fuel, if they leave before June 2013.
    I think it will be a rather expensive tariff however no one knows what the future holds for our prices. The exit penalty is high.

    Cheers.
    His Heart Proved He Was A Red
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    We Know He's Not a Chelsea Fan.
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    • Dave save
    • By Dave save 2nd Mar 10, 6:29 PM
    • 314 Posts
    • 288 Thanks
    Dave save
    • #3
    • 2nd Mar 10, 6:29 PM
    • #3
    • 2nd Mar 10, 6:29 PM
    Well, all energy companies are at it aren't they, including BG? I think it's time the price comparison sites started to factor in these exit fees when they give us the bottom line prices. They're now a penalty against free choice and competition. I'm sure OFGEM will be seriously looking into this practice
  • kjsmith7
    • #4
    • 2nd Mar 10, 9:12 PM
    • #4
    • 2nd Mar 10, 9:12 PM
    Well, all energy companies are at it aren't they, including BG? I think it's time the price comparison sites started to factor in these exit fees when they give us the bottom line prices. They're now a penalty against free choice and competition. I'm sure OFGEM will be seriously looking into this practice
    Originally posted by Dave save
    I'd beg to differ. You have a free choice to lock yourself in. If you locked yourself into say, a mobile phone contract, for say... 24 months and left after 12 months, they'd charge you an "exit penalty" of your remaining line rental charges that you would have paid. I'm sure the gas and electricity companies could estimate your usage for the remaining years on your contract and charge you that instead? Very likely more than 100? A contract is a contract.
    • markharding557
    • By markharding557 2nd Mar 10, 11:00 PM
    • 2,910 Posts
    • 3,233 Thanks
    markharding557
    • #5
    • 2nd Mar 10, 11:00 PM
    • #5
    • 2nd Mar 10, 11:00 PM
    Given they are offering a fix at 7% above standard for 5 years would suggest they are not expecting wholesale costs to rise much in that time so i would leave well alone
    • Dave save
    • By Dave save 2nd Mar 10, 11:33 PM
    • 314 Posts
    • 288 Thanks
    Dave save
    • #6
    • 2nd Mar 10, 11:33 PM
    • #6
    • 2nd Mar 10, 11:33 PM
    I'd beg to differ. You have a free choice to lock yourself in. If you locked yourself into say, a mobile phone contract, for say... 24 months and left after 12 months, they'd charge you an "exit penalty" of your remaining line rental charges that you would have paid. I'm sure the gas and electricity companies could estimate your usage for the remaining years on your contract and charge you that instead? Very likely more than 100? A contract is a contract.
    Originally posted by kjsmith7
    My main point was, that if you do a comparison, more and more tariffs come with a lower price and a higher exit penalty. So when you compare, all is not what it seems.

    Personally, I choose not to tie myself into contracts that penalise me. It is a PENALTY not compensation for any loss. Does anybody know how they set these 'penalties'? Another smoke and mirrors exercise from our discredited utility companies maybe?

    So why do utility companies do this? Well I suppose it's just an easy way of guaranteeing a fixed revenue over a set period, irrespective of their costs, efficiencies or their skills at negotiating lower energy costs with suppliers.
    • SwanJon
    • By SwanJon 3rd Mar 10, 7:27 AM
    • 2,397 Posts
    • 943 Thanks
    SwanJon
    • #7
    • 3rd Mar 10, 7:27 AM
    • #7
    • 3rd Mar 10, 7:27 AM
    Given they are offering a fix at 7% above standard for 5 years would suggest they are not expecting wholesale costs to rise much in that time so i would leave well alone
    Originally posted by markharding557
    It might be that they have managed to come to a simlliar agreement with their suppliers, and are passing this on - I can't imagine a company willing to totally fund this temselves - they'll want to pass some of the risk on (in both directions)

    My main point was, that if you do a comparison, more and more tariffs come with a lower price and a higher exit penalty. So when you compare, all is not what it seems.
    Originally posted by Dave save
    Why? If you stick to the T&Cs you agree to , you will only pay what the comparison suggests (assuming consumption doesn't change)

    . Does anybody know how they set these 'penalties'? Another smoke and mirrors exercise from our discredited utility companies maybe?
    Originally posted by Dave save
    I don't know where the exact figures come from, but as I said above, they are not funding fixed rates themselves - they will probably have a (more) binding contract with their suppliers to continue to buy a certain amount of energy at a certain price - they won't be able to get out of it as easily as you.
    As for non-fixed rates, I don't 100% agree with the exit fee, I'm fairly sure it is to discourage serial switching, and the costs associated with this for the supplier. An alternative would be to rebill you on the standard price if you left early.

    PS - I work for BG
    • Bark01
    • By Bark01 3rd Mar 10, 8:26 AM
    • 785 Posts
    • 250 Thanks
    Bark01
    • #8
    • 3rd Mar 10, 8:26 AM
    • #8
    • 3rd Mar 10, 8:26 AM
    The exit fees are there to cover the energy brought in advance. If you sign up to a five year deal the company would expect yo uto stay for 5 years so would hedge gas for you to cover a five year period. If you leave after a year then they will have brought 4 years to much gas.

    *** Thats a very simplified view
    • Cardew
    • By Cardew 3rd Mar 10, 8:44 AM
    • 27,836 Posts
    • 13,704 Thanks
    Cardew
    • #9
    • 3rd Mar 10, 8:44 AM
    • #9
    • 3rd Mar 10, 8:44 AM
    Well, all energy companies are at it aren't they, including BG? I think it's time the price comparison sites started to factor in these exit fees when they give us the bottom line prices. They're now a penalty against free choice and competition. I'm sure OFGEM will be seriously looking into this practice
    Originally posted by Dave save
    I suspect the main reason for exit penalties is to curb the activities of the serial 'switching tarts'.

    Many people on here state they switch several times a year purely for the cashback.

    'free choice and competition' opened up a loop hole that the companies understandably needed to close.
    • davidgmmafan
    • By davidgmmafan 10th Mar 10, 4:57 PM
    • 1,446 Posts
    • 522 Thanks
    davidgmmafan
    I am not a fan of exit fees per se but on such a long deal I think it is ok. I'm on SOL17 with NPower which will save me around 200 over the year, against that my exit fee of 20 per fuel is of no consequence. It just means I need to be saving more than 40 before I even consider switching.

    I think fees would only be a problem if everyone was doing it which I don't believe is the case at the moment.

    I doube even energy companies know what will happen with prices, I'd guess the trend will be upward what with our puny storage capacity and ever increasing demand from countries which are industrializing at a reapid rate.
  • teddyco
    Maybe this is the start of a downward movement in energy prices or price war
    and the energy companies are trying to tie in customers before prices start to fall?

    I did see in the Wall Street Journal today that the UK approves a massive natural gas
    storage facility due to come on line in 2014. That should give users of natural gas some relief.

    http://online.wsj.com/article/SB10001424052748704431404575067101794535996.html?m od=googlenews_wsj
    Last edited by teddyco; 10-03-2010 at 8:17 PM.
  • kippen noedel
    7% above standard is probably 25% above the cheapest rates available

    if you are worried about future prices it at least gives you security,

    pay your money take you chance/choice but don;t complain if prices jump another 35% in the next year and you did nothing when the opportunity was there.

    • Pincher
    • By Pincher 11th Mar 10, 3:34 PM
    • 6,516 Posts
    • 2,491 Thanks
    Pincher
    "until death us do part, unless I manage to hook up with somebody foxier than you, in which case I want to be able to dump you online with the minimum of fuss."

    I see nothing wrong with exit penalties, if they are clearly displayed in the Key Facts. People have no problems with Early Redemption Penalties with thousands of pounds on fixed rate mortgages, so why is a 100 exit penalty such a big deal.

    As for the EDF deal, it seems to be priced at 7% above standard tariff,
    but nobody here would be on that. Let us say we are on the cheapest online tariff and paying 900 a year, and the EDF five year fix is 1,200 a year. Assume prices are increasing 8% linearly, which is roughly 80 a year. In year one,we are overpaying 300, year two 220, year three 140, year four 60, it's only in year five that we win by 20!

    So all we are doing is to pay the high prices that won't be here for another five years. In total, we will be overpaying 700 over the five years. AND we get penalised for switching away.

    What kind of an idiotic deal is that
    • Gorgeous George
    • By Gorgeous George 12th Mar 10, 7:57 AM
    • 7,797 Posts
    • 8,484 Thanks
    Gorgeous George
    There is no way that I would fix for 5 years at such a huge cost. Pincher is spot on.

    Anybody who takes up this offer needs their heads read.

    On the whole, I like exit fees as they make uSwitch and other worthless organisations less proftable.

    GG
    Last edited by Gorgeous George; 12-03-2010 at 1:45 PM.
    There are 10 types of people in this world. Those who understand binary and those that don't.
    • Bark01
    • By Bark01 12th Mar 10, 1:53 PM
    • 785 Posts
    • 250 Thanks
    Bark01
    "until death us do part, unless I manage to hook up with somebody foxier than you, in which case I want to be able to dump you online with the minimum of fuss."

    I see nothing wrong with exit penalties, if they are clearly displayed in the Key Facts. People have no problems with Early Redemption Penalties with thousands of pounds on fixed rate mortgages, so why is a 100 exit penalty such a big deal.

    As for the EDF deal, it seems to be priced at 7% above standard tariff,
    but nobody here would be on that. Let us say we are on the cheapest online tariff and paying 900 a year, and the EDF five year fix is 1,200 a year. Assume prices are increasing 8% linearly, which is roughly 80 a year. In year one,we are overpaying 300, year two 220, year three 140, year four 60, it's only in year five that we win by 20!

    So all we are doing is to pay the high prices that won't be here for another five years. In total, we will be overpaying 700 over the five years. AND we get penalised for switching away.

    What kind of an idiotic deal is that
    Originally posted by Pincher
    How about working out if you would of saved money (so far) if you had taken out a simialr deal in July 2008?
    • Pincher
    • By Pincher 13th Mar 10, 1:46 PM
    • 6,516 Posts
    • 2,491 Thanks
    Pincher
    How about working out if you would of saved money (so far) if you had taken out a simialr deal in July 2008?
    Originally posted by Bark01
    Similar? Do you mean the price you fixed in July 2008 at was 30% higher than the cheapest you could have got at that time? Subsequently, prices jumped by 50%, so you still won.

    Assuming the cheapest you can get currently is 900, a 50% increase is 1,350 p.a., 30% increase is 1,170.

    If I actually thought the worst case rise during the next five years is 50%, and I fixed at 1,350, I would be paying the worst case price for the entire five years. I will need my head examined.

    If I think the worst case rise is 30%, which Ofgem warns, and I fixed at 1,170 (roughly the EDF deal), still crazy.

    There is a point beyond which a fix no longer makes sense.
    I am very happy to fix for five years with a 7% premium, on the current best price I can get, which is 900 + 7% = 963. Show me that offer, and I will jump to it.

    So, we can do a quick survey.

    "What is the highest price you would fix at for a five year fixed deal?"

    My answer is: 990, equivalent to 900 + 10%.

    Prices are based the average consumption used by the comparison sites.
  • kippen noedel
    How about working out if you would of saved money (so far) if you had taken out a simialr deal in July 2008?
    Originally posted by Bark01
    Prices for gas are around 13% more expensive today than in July 2008, some electricity is marginally cheaper 1-2%

    However on the average 3300kwh el & 22500kwh gas DF usage your pocket would be an average 22% better off over the same time period had you taken a fixed price.

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