We’ve had to wait a long time for them, but they’re back. Annual contracts for the supply of electricity and gas, so that for twelve months you no longer have to be shocked by news reports about increasingly expensive energy.
“The energy suppliers started cautiously with contracts for six months, but now the annual contracts are also coming through,” says Ben Woldring of comparison site Gaslicht.com. “Many people were still apprehensive about switching to a cheaper contract with variable prices. They often thought, that is a lure and after a month the prices will go up again.”
offer today according to regulator ACM eight suppliers on different contracts with a term of one year. These annual contracts cover more than 20 percent of the market, which is double compared to a month earlier.
But what good is certainty if the price ceiling absorbs the greatest risk of price increases? Those who ultimately have to pay more than 40 cents per kilowatt hour (kWh) and 1.45 per cubic meter of gas know that they receive a subsidy from the government.
But that ceiling only applies up to a maximum of 1,200 cubic meters of gas and 2,900 kWh of electricity. “In addition, Minister Kaag of Finance has indicated that the price ceiling will really end on December 31. In other words, in the middle of winter, when you use by far the most energy,” says Woldring. Those who sign an annual contract now benefit from the price certainty for the entire winter. A possible disadvantage is that you do not immediately benefit from price reductions.
ACM expects that more longer contracts will be offered from June 1. Possibly also with fixed prices for three or even five years. But terminating those contracts prematurely will cost much more than is currently the case. Those who now conclude an annual contract must pay a maximum of 100 euros (50 for gas and 50 for electricity) in the event of a premature switch to a more attractive offer. After June 1, that will be much more, comparable to the cancellation costs of a mortgage contract. The new arrangement ensures that you will pay the difference between the old and new energy prices for the period that the contract is still running.
The introduction of that system apparently takes some time, because the first deadline of 1 April was not met. Since last year, Minister Jetten has been urging the availability of longer energy contracts. “In January, we published the rules for the new termination fee,” says an ACM spokesperson. “This means that in the event of an early switch, your old supplier must be informed immediately. They can then let you know what the cancellation costs are if you still have a permanent contract.” This must be done within two weeks, because then the switcher can still cancel his intended contract if desired. “Now the suppliers inform each other a few days before the actual switch. That message traffic must therefore be adjusted,” says ACM.
Many more people are now looking at the possibility of switching. During the price explosion last year, the Gaslicht.com site generated 40 percent more visitors than in 2021. “But then we hardly had any offers for new contracts. Those higher visitor numbers are still there and, unlike then, you can now switch,” says price comparator Woldring.
Last month is 1.2 percent of households switched. Three times as many compared to last year
According to ACM’s energy monitor, last month 1.2 percent of households transferred to a new contract. That’s not much, but compared to last year’s low point, it’s tripled. And according to the regulator, the number of contracts with prices below the price cap is increasing. “That now concerns 35 percent of the contracts, compared to 16 percent a month earlier.” With these contracts, the rate is therefore below the electricity price of 0.40 euros per kWh and below the gas price of 1.45 euros per cubic meter.
Energy Minister Jetten reported this week that the price cap cost the treasury €2.7 billion in the first three months of the year. More than 70 percent of households have now benefited from the scheme, because energy suppliers were able to recover part of the costs from the treasury. Just under 30 percent of consumers did not receive a subsidy. For example, those people benefited from previously concluded contracts.
Jetten noted last week in a letter to the House of Representatives that it is now worthwhile for many people to switch. “I therefore want to encourage consumers to continue to see whether switching can work out positively for them.”
More than 70 percent of all households have now benefited from the price cap
Words that can count on the support of Woldring. Not only because some switchers will use price comparison sites, but also because it is beneficial for consumers and the government. “It strikes me that this discussion is being conducted more clearly in Germany. As a cabinet, encourage people to switch, because many existing contracts with high rates cost the treasury a lot of money.”
After all, for two thirds of the contracts, with the higher prices, energy suppliers still receive government support, while wholesale prices have already fallen sharply. Consumers still pay an average of 2.5 times as much for electricity and gas as they did two years ago.
No one would have dared to hope that prices would fall so quickly at the end of last year, says Woldring. He thinks it is proof that the Netherlands has designed an excellent instrument with the price ceiling. “The market itself is now showing that it can be done cheaper. In other countries, such as the United Kingdom, the government pays itself blue, while consumers there can hardly benefit from the price reduction.”