Signing an energy contract for your home should be straight forward; whether you take advantage of the Energy Advisors free service through the association, or have sorted the contracts out yourself.
However, we are becoming increasingly aware of some dodgy dealings in the energy market, particularly with secondary suppliers, variable rate contracts and winter trackers/STOD tariffs.
Secondary Suppliers
Recently, we’ve been made aware of companies that have been pressurising care homes into signing contracts to manage gas contracts on the owners’ behalf.
Because the company is not itself a gas supplier (in other words, a secondary supplier), you are not signing an agreement directly with the supplier, as you would normally do. This means that the secondary supplier is not governed by The Governments trading licence conditions; consequently OFGEM can’t take any action.
Under the contract terms, you do not pay the gas shipper directly for gas that you’ve used; you pay the secondary supplier in advance for future gas use. You will not be told who is supplying your gas, because the secondary supplier moves your contract around the main suppliers to increase their own profit.
Under this system there is absolutely no guarantee that the secondary supplier is paying the gas shipper on your behalf, which could mean you end up paying twice for your energy.
Variable rate contracts
Many companies, including some of the biggest suppliers in the UK are now offering variable rate contracts. The attraction of these contracts is in the introductory rate. This can take the form of two offers:
· The offer of a unit charge significantly under anything you’ve been offered by other suppliers
· Cash back offer for signing an agreement
In some instances the offers being made are true and are worth serious consideration. However, we have been made aware of variable rate contracts which offer you a very low introductory rate but with the condition that the unit rate can be changed with 7, 14 or 28 days notice. This can be applied for the duration of the contract so, if you agree a three year contract, the supplier can change the rate you’re paying at any time over the full three years.
Winter Trackers and STOD tariffs
Winter trackers (gas) and STOD tariffs (electric) effectively work the same way. For gas and electric you have a nominated annual quantity figure which helps suppliers work out how much energy you use over 12 months.
In terms of gas over the winter months, your supplier "allows" you to use a certain number of kilowatt hours per month (usually your annual quantity divided by 12 months). They charge this usage at the rate described on your contract.
In the terms and conditions they then go on to state that any usage above this figure is charged at a different rate (usually between 0.5 and 0.9pkwh HIGHER than the quoted rate).
The problem is that you don’t use the same amount of gas every month. In fact you use 40% of your total annual gas consumption between December and February.
This means you are guaranteed to go over the “allowed” usage over the winter months, and are therefore going to be paying a higher rate than your contract states.
In terms of electric a STOD tariff is similar in that the supplier charges you more for electric used in the winter months and less for electric used in the summer. Although this may sound attractive, because of the difference in daylight hours between winter and summer, you are more likely to use a larger amount of electricity in the winter – simply because you have your lights on for longer periods.
DO’S AND DON’TS
Before you agree new gas and electric contracts you need to be aware of exactly what you’re signing. In this respect there are several rules that you should stick to:
DON’T
· Agree anything over the phone
· Sign an agreement until you have seen the terms and conditions
· Accept face to face visits unless you have received a written offer in advance
DO
· Ask to see any offer in writing before you agree a contract
· Insist on reading the terms and conditions thoroughly before signing
· Obtain a counter-signed copy of the contract for your records