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Energy exit fees are rising with MoneySavingExpert and Martin Lewis warning people to check before taking fixed deals before October's rise



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Energy deal exit fees are now up to 10 times higher than they were last year, a new report has revealed, heaping further pressure on households already struggling to meet the costs of escalating bills.

With homes facing crippling prices for gas and electricity this year - only likely to be made worse with a second price cap rise in October that will add another £800 to annual bills - it isn't just the price of the energy itself companies are now increasing.

Investigations by website MoneySavingExpert have found the penalties to leave some fixed-rate tariffs early - in which the price you pay for each unit of energy is locked in for the duration of your deal - have gone up by hundreds of pounds in the last 12 months.

Exit fees are charged if a customer wishes to switch deals or suppliers before their current contract ends. Photo: iStock.
Exit fees are charged if a customer wishes to switch deals or suppliers before their current contract ends. Photo: iStock.

Any consumer thinking of fixing their energy tariff in order to bring an element of certainty to the amount they are paying is being warned to watch out for expensive exit penalties attached to offers, before signing up to a deal that could tie them in for anything between 12 months and two years.

Just a year ago the typical cost for leaving a fixed rate deal for a dual-fuel home was around £60, says MSE, with the highest seen £150. But 12 months on and many fixed deals currently on the market have sky-high exit fees running into several hundreds of pounds.

This means that if wholesale prices do start to tumble, bringing down with them the domestic costs for gas and electricity and consequently therefore cheaper fixed-rate deals as well, any saving households think they can make by shopping around and switching deals or suppliers could be wiped out if they have to then find as much as £600 to leave the existing rates they're locked into.

Exit fees on energy bills are rising, says MoneySavingExpert
Exit fees on energy bills are rising, says MoneySavingExpert

Firms, says the consumer website, can charge different exit fees depending on the length of the fixed deal with one-year fixes tending to have lower exit fees than two year contracts, while some firms, including Octopus Energy and E.on, still don't charge fees at all.

Under energy licence conditions, providers are allowed to charge exit fees on fixed term contracts provided they are 'proportionate' and 'must not exceed direct economic loss' to the losing supplier.

However energy regulator Ofgem, says MSE, doesn't currently define what is proportionate or how much would exceed direct economic loss. Ofgem says it expects charges to be fair and suppliers must make any exit fees clear in the 'principle terms' of the tariff that need to be provided before both parties enter into a contract.

Suppliers must make exit fees clear, says Ofgem. Photo: Stock image.
Suppliers must make exit fees clear, says Ofgem. Photo: Stock image.

Among the companies, the consumer website found, with the biggest changes to exit fees in the last 12 months was British Gas where it cost £80 in 2021 to leave a two-year fixed deal with just one-year fixed deals now totalling £200 to walk away prematurely.

A year ago customers with EDF would have been charged £70 to leave their two-year fixed rate tariff before the deal ended but this has leapt to £300 in 2022. Researchers say they also found Scottish Power exit fees to have increased from nothing for two-year deals and £60 for one-year deals in 2021 up to £300 for either this year.

Outfox the Market, claims MoneySavingExpert, now has some of the largest of the exit fees where getting out of a two-year deal before it has expired could cost a customer £600. And while SSE has increased the cost of leaving its one-year fixed deal from £0 to £60, two-year fixed rates now also stand at £60 compared to between £0 and £150 in 2021.

A fixed-rate deal locks in the price customers pay for each unit of gas and electricity for a set amount of time. Picture: iStock.
A fixed-rate deal locks in the price customers pay for each unit of gas and electricity for a set amount of time. Picture: iStock.

Martin Lewis, founder of MoneySavingExpert.com, said he believes the high exit fees could be the 'final nail in the coffin' when it comes to energy competition.

The television presenter acknowledges that many people are now currently trying to decide right now whether or not to fix into a deal - faced with October's impending rise - and he's warning customers to check thoroughly any fixed-rate deal they may be offered by either their existing supplier or a new one.

Martin Lewis says people are now trying to decide whether to fix into a deal before October
Martin Lewis says people are now trying to decide whether to fix into a deal before October

He explained: "The only deals out there worth considering are existing customer deals, and the rules say providers don’t have to publish them – they can offer them to individuals. This means there’s far less help available for people making those decisions (at MSE we try and compile the tariffs, but we rely on consumers reporting them to us).

"The lack of transparency and visibility makes it easier for firms to add on these hideous early exit penalties if you leave before the fix ends. Altogether, that just ramps up the consequence of the decision of whether to fix or not, because with these tariffs you can no longer escape easily if you later think you’ve made the wrong call."



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