Energy exit fees are up to 10 TIMES HIGHER than last year, warns MoneySavingExpert

Martin Lewis, founder of MoneySavingExpert.com, said: "These massive, outrageous early exit fees are the final nail in the coffin of dying energy competition. Many people are trying to decide whether to fix or not at the moment. That no longer means going cheaper, it’s about whether you should pay more now, to forestall the huge rise likely coming in October.

"Yet, the difficulty of making that decision is compounded by the fact that you can no longer use a comparison site. 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. It’s a pig’s ear and the regulator needs to intervene to change things."

Under the energy licence conditions, providers are allowed to charge exit fees on fixed term contracts (2), provided they are 'proportionate' and 'must not exceed direct economic loss' to the losing supplier. However, regulator Ofgem doesn't define what's proportionate or how much would exceed direct economic loss.

MSE asked Ofgem if the current exit fees levels are too high. The energy regulator said that "economic loss to suppliers is much higher in the current market than historically" and that suppliers are "not prohibited from charging exit fees". However, suppliers must make any exit fees clear in the 'Principal Terms' of a tariff, which need to be provided before entering into a contract.

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Notes to editors

(1)   For the latest analysis of the top deals on the market right now and the fixes worth considering, see Martin's 'Should you fix your energy deal? analysis.

(2)   Suppliers can’t charge exit penalties on contracts without an end date (eg, standard variable tariffs). There’s also a 14-day cooling off period after switching to a new deal, which allows customers to cancel without penalties, and suppliers aren't allowed to charge exit fees if they switch away within the last 49 days of a fixed-term contract.

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