Millions of energy customers have been signed up to “unfair” fixed-rate tariffs that do not reflect current prices, a consumer website has warned.
Energyhelpline.com, which compares prices, says customers on certain deals could be losing out on more than £500 a year, as consumer energy prices fall.
It says many customers are locked into contracts they have to pay penalties to get out of.
But providers argue fixed-term deals offer customers “peace of mind”.
Some of the biggest names in energy are cutting prices but Energyhelpline warned that some people were unwittingly paying more than they should for their bills.
“There are millions of people in lock-in tariffs today,’ said Energyhelpline’s co-founder Mark Todd.
“It can be really unfair because many of them don’t reflect the market rate and some are up to £532 a year more expensive than the current market conditions.
“It can also be very confusing to get out of them and they can include big cancellation penalties, up to £100.”
Pressure
Over the past year consumer energy prices have fallen by around 8%, but many customers on fixed-price deals have not benefited from the cuts.
Public pressure on energy companies to reduce household bills means prices could carry on falling in the short term.
With many customers unsure as to whether the savings they could make outweigh the costs of switching over, the advice from consumer groups is to shop around if people are in two minds about the deal they are on.
“If people are worried about being on fixed-price deals, there’s nothing to stop them leaving,” says Audrey Gallacher, from Consumer Focus.
Energy consumer David Meadows from Ringwood
Energy consumer David Meadows has been on a fixed tariff since 2007
“They may be exposing themselves to a termination charge and therefore they should do their sums, do a price comparison, look at how much they can potentially save and look to offset that against any potential termination fee.”
British Gas is among the companies to offer fixed-price deals.
In a statement, it said: “We offer long-term contracts because, like mortgage customers, many energy users want the peace of mind that fixed products offer.
“Customers can at any time choose to exit their deal before maturity upon payment of an administration fee, which is clearly explained to customers when their contract starts.”
British Gas customer David Meadows, of Ringwood, Hampshire, who has been locked into a contract since 2007, believes energy firms should be more understanding about the dilemmas consumers face.
“It appears to me that the energy companies could make this a little bit more comfortable for people by reducing the cancellation charges considerably,” he said.
“Perhaps £20 would be sufficient to make people concentrate on the decision when they go into the tariff.”
Energy watchdog Ofgem is looking into the practice of fixed-tariff contracts and is due to report on the issue later this month.
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Feb 01
Annual Fix Version 3 from EDF Energy is a fixed price gas and electricity tariff where customers can benefit from fixed unit rates until at least 30th June 2010. Each year thereafter you will be given the opportunity by EDF Energy to fix your gas and electricity unit rates for another year.
Annual Fix Version 3 is also available from Sainsbury’s Energy at exactly the same prices and features.
Annual Fix Version 3 was launched on the 22nd June 2009 and replaced the existing Annual Fix Version 2 tariff.
Annual Fix Version 3 is available as a dual fuel tariff for those customers with gas and electricity and also as an electricity only tariff.
EDF Energy offer an Electricity Bill Saver discount with this tariff which means that customers living in the Seeboard, SWEB and London regions and who do not have mains gas can benefit from an extra discount.
Customers can pay their gas and electricity bills for Annual Fix Version 3 by monthly direct debit only.
Early termination fees do apply with Annual Fix Version 3 which means that if you change supplier before 30 September 2010, you may be charged a cancellation fee. The cancellation fees are £25 for electricity and £25 for gas (a total of £50 for customers with both gas and electricity accounts). You should note that no fee is payable at the yearly renewal date if you elect not remain on the Annual Fix Version 3 tariff within 14 days of receiving the renewal notice.
Annual Fix Version 3 is available as an offline energy account where your gas and electricity bills are posted to you.
Pink Utilities allows domestic energy customers to compare the gas and electricity prices of Annual Fix Version 3 against all other energy tariffs to see if it is the best tariff for your home.
You can either call Pink Utilities for free on 0800 083 3729 or click on one of the links below:
If you wish to compare gas and electricity prices click here
If you wish to compare electricity only prices click here