Exit fees trapping consumers on expensive fixed price tariffs

Almost 340 fixed price energy tariffs are now more expensive than Ofgem’s price cap, according to the Warm This Winter campaign, many of them with hefty exit fees that trap consumers into bad deals.

The group has urged suppliers to waive these fees to enable consumers to switch to the cheaper standard variable tariffs covered by the cap.

Warm This Winter commissioned a report from the consultancy Future Energy Associates, which found 337 fixed price tariffs are now more expensive than the price cap following the latest decrease at the beginning of this month. The average exit fee for a dual fuel customer on these tariffs is £138.

As of 1 October, the report said there were 12 active fixed price tariffs on the market, of which 11 are more expensive than the new price cap.

The analysis also looked at the level of exit fees more generally for fixed priced tariffs over the last two years. According to the report, Ecotricity had the highest charges, ranging from £100 to £200 per fuel and averaging £150. All of its tariffs had exit fees, as was the case for So Energy and Utility Warehouse as well.

Just one in 20 (6%) British Gas tariffs had no exit fee – the lowest rate for one of the main suppliers. Its fees ranged from £30 to £100 per fuel and averaged £62.

This compared to 12% for Eon, 14% for EDF Energy, 15% for Ovo Energy, 33% for SSE and 40% for Scottish Power.

The only supplier without any exit fees whatsoever was Good Energy although Octopus Energy and white label partner Co-Operative Energy had almost none.

Source: Warm This Winter and Future Energy Associates

In June, British Gas, Eon and Scottish Power said they do not charge exit fees for customers switching internally. They made the statements after Utility Week revealed up to 1.55 million customers may have been on fixed price tariffs more expensive than the price cap at the time. Utility Warehouse said it had scrapped exit fees for both internal and external switches from its older, more expensive tariffs. Octopus said it would be waiving some of its exit fees although EDF and Ovo said they would not.

Commenting on the new report, Simon Francis from the End Fuel Poverty Coalition said: “With energy prices subject to change, customers should exercise extreme caution when thinking about switching and fixing and we would call on companies to waive exit fees so people can switch easily to the cheapest tariff available.

“And while households suffer, the government sits on its hands and refuses to introduce longer term tariff reforms which could bring down bills and help people stay warm this winter and every winter.

“Indeed, with the Prime Minister recently halting work to improve the energy efficiency of buildings, Britain’s households will be trapped in cold damp homes for years to come.”

Speaking to Utility Week, Francis said although exit fees may be justified during more normal times, consumers who took fixed price tariffs over the last winter have been “locked into these really high rates that are unfair when they see everyone else units rates coming down”.

“It’s not like energy firms at the moment are losing money of these deals,” he argued. “Going back two years when margins were tight and everyone was fighting over customers, then you can understand why they were there, but there is no competition in the market at the moment.”

He said the number of customers on more expensive fixed price tariffs is thought to be in the “hundreds of thousands”, adding: “It’s not everyone. We’re not talking about massive blanket giveaways here. We’re talking about something that affects hundreds of thousands of households but it would make a difference to those households.”

Francis said further analysis by Future Energy Associates found there are 206 fixed price tariffs that will still be higher than the projected Ofgem price cap from 1 January.

Responding to the report, a spokesperson for Energy UK said:“Taking out a fixed deal means customers are protected from any price rises for the length of their contract but it’s important to understand that conversely, if prices fall during that time, they could miss out on benefiting. It’s that choice that has to be weighed up when considering any fixed-term deal.

“When a customer signs up to a fixed deal, the supplier buys in advance the energy that customer will need at the prevailing wholesale price. If the wholesale price subsequently falls and the customer chooses to leave the contract early, then the supplier can sell the previously purchased energy back to the market but at a loss. Exit fees are there to cover that loss.”