Fixed means ‘fixed’ for energy contracts – so why not mobile?

Having worked on the Which? Affordable Energy Campaign for well over a year, I could list off the top of my head at least twenty things that are wrong with the energy industry.

But today I want to talk about something it does right.

Escape from energy price rises

We’re reaching the time of year when bill-payers quake in their boots – SSE has announced price rises of 9% for the winter, and people will be worried that their energy company will be the next to go. Eon has announced that its prices will not go up until at least 2013, but that won’t necessarily comfort those who are still waiting for their own company to make an announcement.

But here’s the good news: you, as an energy customer, don’t actually have to accept these price rises. That’s right – you can reject them. There are three possible tariffs that you might be on with your company:

• Fixed: the simplest one. You sign up to a fixed contract, paying a set price for your energy, for a set period of time. In this case, the price rises won’t affect you.
• Variable: you’re not locked in. You sign up to pay a certain amount, but accept that there might be price rises. However, as you’re not locked into a contract, you can switch away if the company raises its prices.
• Fixed variable: the tricky one. These are contracts where the price you pay might be ‘fixed’ at a certain percentage below the ‘standard’ rate. So when the standard rate rises, so does your bill. However, with these deals, even though you may have signed a contract for a set period, the energy company must allow you to leave the contract if they increase their prices.

Say no to energy price rises

Ofgem licence conditions (which all energy companies must comply with) say that if the company increases any of the charges set out in your contract they must give you the right to leave. This includes price rises, late-payment charges, and changes to discounts that you get.

All you need to do is write to your supplier before the price rises take effect (energy companies must give you 30 days notice before the prices go up), make sure your new supplier contacts your old supplier within 15 days, and you won’t have to pay the increased prices or an exit fee.

Fixed Means Fixed – but only for energy

I was surprised when I heard of this rule – we’ve recently been working hard on our Fixed Means Fixed campaign, trying to convince Ofcom to stop mobile companies raising their prices mid-contract, then preventing customers from leaving unless they pay a huge charge.

The excuses we’ve been given by the mobile companies include things like ‘we’re forced to do it – rising costs mean we can’t afford not to raise prices’, which sounds very similar to the reasons energy companies give. It’s out of their hands, costs are rising, and so they have to put up their prices.

I’m not convinced – all companies have costs, and all costs go up from time-to-time. One of the reasons customers tie themselves to a company for 12-24 months is that they think it’s an insurance against these kinds of price rises. By tying customers in, mobile phone companies are benefiting from a guaranteed revenue stream for the length of the contract – it’s only fair that they also bear the risk associated with that guaranteed revenue. Put another way, when their costs go down do they lower prices for consumers on contracts?

I’m pleased that Ofgem has recognised this and made sure that energy companies let their customers leave if their prices go up – but why can’t mobile companies do the same?