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Treating existing customers fairly

Posted on 6 January 2012

Today’s announcement from Ovo Energy that it is cutting its prices – but just for new customers - follows our own price cut announcement on 19 December last year. This announcement and the speculation that some of the Big 6 may now be forced to follow suit highlights two interesting issues. Firstly, it’s the independent suppliers like Co-operative Energy which are leading the field on price. The Big 6 may still control 99% of the domestic market but they are sluggish behemoths compared to the nimble-footed independent suppliers. The fact that the independents are setting the pricing agenda seems to support the Government’s view that levelling the playing field for the independents in the energy market will encourage competition and so benefit consumers. The second interesting issue is the hazard of fixed price tariffs when markets are falling. Ovo’s cut applies only to new customers signing up from today and to existing customers who renew when their contracts expire. That means all their existing customers are stuck in higher priced contracts, unless they’re prepared to break their contracts and incur an exit penalty. At Co-operative Energy, we have just one tariff. It’s a variable rate tariff, which means we change the price from time to time so that it stays consistently competitive. We think this is more flexible, especially in falling markets, as we can pass on price cuts quickly and, crucially, to existing customers as well as to new ones.

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