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Calls for an end to the energy exit fee ‘trap’

Calls for an end to the energy exit fee ‘trap’
Emma Lunn
Written By:
Emma Lunn

High exit fees on fixed rate energy tariffs are preventing households from moving to cheaper deals, according to a new report.

The Warm This Winter Tariff Watch report compiled by Future Energy Associates (FEA) found that billpayers are stuck on expensive fixed rate energy tariffs as a result of the increase in exit fees.

The report found that exit fees have increased by 345% in the past three years, with 256 out of the available 383 available fixed rate tariffs having exit fees of more than £100.

Researchers found that exit fees have increased from an average of £42.06 in early 2021 to a peak of £187.21 today.

The report also found that 292 (76%) of fixed tariffs have annual costs of £1,690 or more – the current level of Ofgem’s energy price cap.

Researchers calculated that customers considering fixing their energy tariffs could be £716 worse off at the end of the year.

The study found there are 11 new fixed tariffs now available to new customers under the April price cap, but warns consumers could end up worse off if they fix now, even with the latest forecasts that prices could rise again later this year.

The most expensive of the currently available tariffs is the EDF Energy Essentials 2yr Apr 26 v2 and the Ecotricity 2 Year Fixed Green Electricity V24.1 fix, which cost £1690 and £1,712 per year respectively for a typical household.

FEA worked out that billpayers would be £62 and £84 worse off on these deals than if they stayed on their supplier’s standard variable tariff (SVT) – but the ‘extortionate’ exit fees of £250 and £300 respectively would need to be paid if consumers wanted to switch to a cheaper deal.

‘Ridiculous and unnecessary’

Fiona Waters, Warm This Winter spokesperson, said: “Yet again, energy suppliers are letting customers down, with many stuck in fixed rate deals they can’t get out of because of extortionate exit fees, and it’s Hobson’s choice for those who want the peace of mind of a fixed rate but will probably end up worse off later in the year.

“It’s just ridiculous and unnecessary that billpayers have to navigate such a complex tariff system where they get ripped off at every level, from rising standing charges to profiteering gas companies, and still face bills that are 60% higher than three years ago.

“We need long-term solutions from Government, such as expanding homegrown renewable energy and a mass programme of insulation to bring down bills once and for all.”

Simon Francis, coordinator of The End Fuel Poverty Coalition, said: “Exit fees have gone from a minor irritation to a serious concern. Customers who have had poor customer service may now find themselves trapped with their supplier due to these penalties.

“The energy industry is quick to promote the idea that switching will save you money, but the reality is that the small print could leave struggling customers out of pocket.

“Households who are suffering the most are often the ones looking for the most security through a fixed tariff, but we would urge them to only fix if they are absolutely certain it is the right thing to do.

“Checking your bill to get your existing usage numbers and entering these details into price comparison sites is one way of testing the market – but always check that exit fees are under £100.”

The best fixed energy deals

Tariff Watch found there were five out of 32 fixed tariffs worth considering – these are any fixed tariff that has a total annual cost of less than £1,635 and an exit fee less than £100.

Tariffs the group said consumers should consider are:

  • Utility Warehouse Fixed Saver 16 (bundled)
  • Outfox the Market Fix’d Mar 24 v1.0 (only outside of Scotland)
  • Octopus Energy Loyal Octopus 12M Fixed March 2024
  • Octopus 12M Fixed March 2024
  • EDF Energy Essentials 1yr Apr 25 v3

In terms of variable tariffs, the Tariff Watch report recommends customers should look for the Home Energy, Home SVT Mar 2024 v1 (£1,627), or the Octopus Energy Flexible Octopus (£1675) for dual fuel tariffs.

Dylan Johnson, Future Energy Associates analyst, said: “While we have seen the return of competitive market conditions, we are worried about certain consumer groups being left behind.

“Our data shows evidence that specific suppliers are raising prices in certain regions to absurd levels. One example of this is OutFox the Market, which, while offering consistently cheaper fixed prices and offering some zero exit fee tariffs, are at the same time charging a staggering £2,412 per year in a DNO region in Scotland.”