“Guide to Gas and Electricity Contracts: Switching and Savings Tips”

Gas and electricity are quickly becoming cheaper and there are new permanent contracts. But what is sensible? Short answer: for one person acting quickly can be smart, for another it is better to wait a few weeks. But in all cases: never respond to cold calls.

Permanent contracts for electricity and gas are returning. At Eneco and Vattenfall, customers can again conclude fixed price contracts for three years from 1 June. Essent’s 3.3 million customers can already switch to an annual contract. The largest energy supplier in the Netherlands expects to be able to offer multi-year contracts within a few weeks.

For most households it pays to switch, but be careful: don’t just accept an offer from energy companies over the phone. ‘An unsolicited telephone offer is never really the best choice,’ says Edwin van Houten of the Netherlands Authority for Consumers and Markets (ACM).

Canceling contracts will become more expensive

ACM receives complaints about misleading telephone calls. Energy companies are falling over each other with offers now that they can buy cheap electricity and gas from wholesalers again.

Energy prices are falling thanks to the relatively mild winter, which means that gas stocks are still reasonably full. Natural gas is not only our main heat source; we also generate another 40 percent of our electricity by burning natural gas. The price of gas therefore largely determines the price of electricity.

At wholesale, energy companies paid 32 euro cents for a cubic meter of gas this week. That was 3.45 euros at the peak last year.

On top of the basic gas price, suppliers pay 21 percent VAT and 60 cents gas tax. Then they have their own costs: marketing and customer service. And of course companies want to make a profit. The average price for consumers was last week, according to energy comparison.nl 1,47 euro.

When gas prices were high and above all unpredictable, energy companies only dared to sell variable contracts. According to Joris Kerkhof, the energy expert of price comparator Independer, the low prices have ensured that suppliers have already started offering semi-annual and annual contracts again.

‘What is added now is that suppliers have also indicated that they will come with three-year contracts from 1 June.’ That date is no coincidence: from then on, ACM will apply new rules for customers who cancel their energy contract.

Until 1 June, consumers pay a fixed amount to switch: 50 to 250 euros, depending on the duration of their contract. This does not always compensate for the loss incurred by energy companies that have purchased gas and electricity for their customers for one, two or three years. From 1 June, customers must make up for that loss if they want to switch: they then pay the difference between the rates in their contract and the current energy prices.

The rules have changed to allow energy suppliers to offer permanent contracts again, and that seems to be working. Consumers can therefore opt for certainty again. With the downside that they run more risk if they want to cancel their contract early.

Switchers have 14 days to change their mind

The cancellation fee can increase considerably due to the new rules, ACM warns. Therefore, ask your old energy supplier how much it will cost if you want to switch after June 1.

Jurgen Jansen, the legal expert of the Vereniging Eigen Huis, advises consumers against entering into a new contract over the phone: ‘It is important to be well informed and to compare different offers. Have you signed a contract that you regret? Then know that you have a reflection period of 14 days in which you can still dissolve the contract.’

Switch now or wait?

According to Arnoud Timmerman of Gaslicht.com, it can pay off to switch suppliers this month. Of the 12 fixed annual contracts already available, ten are cheaper than the price cap.

Bart Koenraadt of Energie Comparison.nl advises to wait a few more weeks. According to him, suppliers will be able to offer even more competitive prices from 1 June. The companies also benefit from multi-year contracts: ‘Because of the higher cancellation fines, the energy company does not have to worry that customers will cancel their contracts en masse if market prices fall. This means that they have to build in less risk margin in the price, which results in lower fixed rates.’

Koenraadt suspects that the gas price may fall further. Timmerman has doubts: ‘Russian and Groningen gas have disappeared. We are now dependent, among other things, on supplies from Norway and on LNG’ – liquefied natural gas from America and the Middle East. ‘The cost price of that gas is higher than we were used to in the past.’ He prefers to be on the safe side.

‘By switching to an annual contract now, you already save because of a lower rate than the price ceiling. You are therefore protected against price increases in the coming winter.’ The price cap ends on December 31.

The variable rates for gas and electricity have been below the price ceiling for some time now, which has been set at 40 cents per kilowatt hour of electricity and 1.45 euros per cubic meter of gas. Anyone who pays considerably more will have to switch anyway, says Kerkhof van Independer: ‘If you now pay, for example, 2 euros or 1.85 per cubic meter, you can already find much cheaper contracts.’

‘If you choose a fixed rate now, you will already have rates that are below the price ceiling and if you take out this now, before 1 June, the current cancellation penalty rules will still apply. You will then receive fixed rates for a year, so that you also have certainty in the winter and early 2024 when the price ceiling ends on 1 January 2024.’

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