Avoid these massive hidden energy charges
Make this mistake with your gas and electricity supplier and you could lose £150!
Energy tariffs come with bewildering complexity. Comparison tools do a good job of simplifying things. The lovemoney.com gas and electricity comparison tool goes further than others for accuracy, because you can enter your exact tariff details (e.g. standing charges and unit rates), but it, like all energy comparison tools, still has one problem: how to deal with exit charges and cashback.
The rules that all energy comparison sites abide by are that exit fees are not included in the quote, but cashback is. Thus, if you leave early, you could pay an exit fee and lose your cashback, and that will make a mockery of the quote you received.
Thankfully, with just a little information you can get around this problem and make comparison easy again. Today's topic is a simple guide to show you how to do just that!
Avoiding exit fees
Most tariffs charge an exit fee if you leave within a specified period and this is typically in the range of £20 to £60. This is usually not a problem because the vast majority of people wait more than 12 months between switching and the exit fee is typically for less than one year, except in the case of fixed or capped tariffs, when it usually lasts for the full deal period. However, all else being equal it's better to go for a tariff with a lower exit fee.
When using our gas and electricity comparison tool, you can see what the exit fees are and how long they last when you reach the results page. Just click on 'more details' next to the tariff.
Avoiding loss of cashback
Most tariffs have discounts. Discounts are usually deducted from your direct debit payments, which means that it's nothing to worry about when you leave the supplier, because you've already received the reward.
However, sometimes what some suppliers call a discount is really cashback. You earn the cashback after 12 months and its credited the following month. Therefore, if you leave the tariff during month eleven you'll lose the discount that you've been earning the whole year. This might add more than £100 to the bill you were expecting to pay when you switched!
This applies every year. If you leave after one year and eleven months then you'll lose the cashback you've been accruing all of the second year. With these sorts of tariffs you want to exit shortly after 12 months where possible to avoid throwing away large amounts of cashback. However, that inflexibility is very unattractive. If there's another tariff that costs about the same, you should go for one of those instead.
Thankfully, just two of the big six suppliers currently operate discounts as annual cashback: npower and Scottish & Southern Energy (which includes the Atlantic brand, and Southern Electric, Scottish Hydro Electric, Swalec and Airtricity). Two smaller suppliers also do this: first:utility and Utilita.
You can see what the discounts are for each tariff in the results page of our tool. Click on 'more details'.
Switching to another tariff with the same supplier
Unfortunately, most suppliers won't let you switch to another of their tariffs if you're an existing customer. npower is one of those that does. However, it used to let customers transfer the cashback offer if you switched to another of its tariffs. Whilst most existing customers probably still benefit from this, npower's newest offers are not so friendly. New customers will also pay an exit fee even if they switch to another npower tariff. npower's exit fees and loss of cashback could result in you losing around £150 if you exit at a bad time, making this supplier the worst for exit costs.
What happens when the price goes up?
If you receive written notice that the price is going up and you want to leave, you can write to the supplier within 10 days and initiate your switch within 15. By doing so, you'll continue to be charged your original price until the switch is flicked and your new supplier takes over.
However, you will still be charged exit fees and, in the case of npower, Scottish & Southern, Utilita and first:utility, you'll lose your cashback for the year. These seem like an unfair contract terms to me.
Exit penalties when moving home
If you move home then you should normally be able to take your tariff with you for free and without penalty. If you choose not to then you'll still face the exit fees and loss of cashback, so it's probably worth taking your tariff, at least initially, because the default tariff you'll be put on by the new property's supplier will be very expensive.
What you're looking for
When you compare gas and electricity, look not just at the price but at the 'more details' section in the results page, paying attention to:
- How high is the exit fee?
- How long does the exit fee apply for?
- If there's a discount, is it paid annually as cashback?
See the best tariffs now and a comparison of some exit fees and cashback. Read: Energy prices start to rise!
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