Warning for Eon capped rate customers

Households that lapse onto this new plan could end up paying £300 a year too much for their gas and electricity (see the Is Your Capped Tariff Ending? guide).

Last week, MoneySavingExpert.com revealed Scottish Power is also locking customers on a cheap fixed-rate product which ends on Monday into an expensive cap.

The new Scottish Power deal also comes with an exit fee of up to £50 if you switch after 30 September (see the Warning for Scottish Power customers MSE News story).

While the Eon tariff is expensive, it does not have an exit fee.

A capped deal is one where prices cannot rise from their initial level for the duration of the term, but they can fall if energy prices drop. A fixed-price deal is where the price does not change for the duration.

Now is generally considered a bad time to switch to a fixed or capped energy tariff, unless you need the surety of set payments, as many experts expect prices to fall over the coming months (see the Energy regulator calls for price cuts and Uswitch moots price cuts MSE News stories).

While the cost of a capped deal could also fall, such plans are generally 10% more expensive than standard rates to begin with.

Eon product details

Specifically, Eon is moving customers on the Price Protection Oct 2009 deal, that ends on 1 October, onto its Price Protection R3 deal, which is a capped tariff that ends in May 2011.

Eon freely admits the new deal is expensive, stating clearly on letters and emails sent to customers the new plan costs 5.8% more than its standard prices.

If the price of energy falls on the standard deal, so too will the price of the capped plan.

Yet figures from price comparison website Energyhelpline.com reveal that the new Eon deal, if used for gas and electricity, is more expensive than the best alternative on a comparison service.

A household with medium usage patterns will pay on average £1,199 a year on the new Eon deal compared to £986 on the cheapest alternative – a £213 saving.

A household with high usage patterns will typically pay £1,610 with Eon and £285 less on the best alternative plan.

When the figures are broken down regionally, the biggest difference is in Manchester where a high user would pay around £1,627 on the Eon capped tariff and £322 less by switching.

Dan Plant, MoneySavingExpert.com money analyst, says: "This is another example of energy firms trying to get as much out of consumers as possible.

"Not only are firms failing to reduce household bills in line with the falling costs they pay for energy, but now they are switching people onto expensive tariffs. They know full well a vast number of customers will not realise what they've done, meaning more money in the power firms' coffers."

An Eon spokesman says: "This offers peace of mind for two winters but people are free to move to any other deal."

Fixed/capped danger

Many households fixed or capped their energy tariff last summer when prices were rocketing. Given most deals lasted a year, many are expiring now.

You're usually placed on your provider's standard tariff on expiry, not its cheap online version.

So, if your cap's ending soon, ensure you compare the price of your NEW deal with the best alternative on the market and switch, if necessary (see the Is Your Capped Tariff Ending? guide).

But don't switch until your deal has ended if there is an exit fee.

Further reading/Key links

Help for those who've capped: Is Your Capped Deal Ending? Slash energy costs: Cheap Gas & Electricity