When is a cheaper fuel deal not a cheaper fuel deal?

09-10-2017

The short answer is when you are switching your Gas and Electric deal if you are in a fixed contract.

With the ever increasing cost of living the one thing that more and more of us are doing is switching our gas and electric suppliers.  Theresa May made a point on 4th of October in the Conservative Conference speech that the Tories intend to cap energy prices, which will be good news for an extra 12 million people a year who don’t shop around for the best prices.

But there is a rip off happening RIGHT UNDER OUR NOSES that looks like its offering customer savings but is actually locking Gas and Electric customers in with the suppliers for another year and making the energy companies a fortune in the process.

So what is this rip off?  Nowadays energy companies tell you if you are on their ‘cheapest currently available tariff’ and how much you would save by switching to it now.  Wow, what lovely selfless people they must be helping us out, and to be honest if you are out of contract with your supplier it is a good idea to sign up or shop around for a better deal.  If, however, you are still in a fixed rate contract you are about to get ripped off without realising it. 

Fuel Rip Off

You see the devil is in the detail, that new rate you are being offered is their best deal the supplier has at that time, but as prices of fuel are rising it probably isn’t as good as the deal you were already on.  The way they calculate the saving you would apparently make is based on a full year’s usage, so assuming your current contract runs out in 6 months they would calculate your current full year usage cost as…

6 months at your current ‘fixed rate’ + 6 months at their ‘standard variable’ tariff = Fuel cost that the saving is measured against

The huge assumption is that you weren’t going to sign up or shop around for another deal when your ‘fixed rate’ runs out at the end of your current contract and that you were just going to pay the ‘standard variable’ tariff for that last bit of the calculation. And that is the bit that is misleading because if you were looking at switching in the first place you would not be considering paying the ‘standard variable’ rate or expect it to be used to calculate your apparent savings.

This means that rather than making a saving you would be IMMEDIATELY paying more for your fuel (ever wonder why they seem to keep on increasing your monthly payments even on a fixed rate deal!) and overall you will be paying potentially hundreds of pounds more not less.

Also bear in mind that it is EXACTLY the same when you go to a comparison site they take your current tariff and calculate how much of it is left then add the standard tariff for your provider to create the remainder of a 12 month period.  They then use that combined value as an assumption for your yearly fuel costs to calculate the new yearly saving you would make if you switched.

So what’s the lesson to be learnt here?  Well whilst prices are going up if you are in a fixed deal stay in it until the last month of your contract and then switch.  Alternatively get your standing charges and unit costs for your current supply and ALWAYS compare that to the new ones you are quoted to make sure that you are actually going to save money and not get a nasty price increase further down the line.

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Maxwell

Chief Admin

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