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Say no to exit penalties

Posted on 8 March 2012

Last Autumn, when energy suppliers were increasing their prices (including us, sadly), a lot of news channels and energy commentators were recommending that people switch to fixed price tariffs to protect themselves against future energy price rises. One switching site reported in September that 60% of its switches were going into fixed price products, far higher than usual. Fixed price tariffs have their place. Some people are prepared to pay a premium for the certainty of knowing that the unit price of their energy won’t change. It’s like an insurance policy. The longer the fix, the higher the premium, usually. But many people are now frustrated that they are stuck in fixed price contracts just as energy prices are starting to fall. Of course, these people can cancel their contracts early if they like, but will invariably incur a cancellation fee, or what we call an “exit penalty”. This can be quite steep: £100 in the case of British Gas. We think exit penalties are unfair and we’ve started a campaign to get the other energy suppliers to waive their exit penalties if people want to switch. In the current climate, suppliers should be doing everything they possibly can to help people save money. A market in which people are free to switch supplier at any time, without penalty, will help to keep suppliers on their toes and ensure that suppliers have to keep their prices competitive. Tying people in is a barrier to open competition, and if there’s something that the energy sector needs more than anything, it’s open competition.

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