The small energy company Groenpand now asks its customers to pay variable prices instead of the agreed fixed rates. The much larger Budget Energie is raffling great prizes for customers who now use 10 percent less energy than a year ago. Good for the customer, the climate and also for the energy company. This speaks of a playful promotion, but an additional advantage is that she may have to buy less (expensive) energy.
The high prices for gas and electricity have surprising effects on the energy market. Of course there are also painful consequences: since prices went upside down this autumn, no fewer than eight energy companies have gone out of business. Affected customers, who often still had money in their hands, were forced to go to competing suppliers who charged the current market prices.
The price increase is also driving real innovation. Such as the Nuts Groep, parent company of Budget Energie and NLE, among others. Who offers since this month energy at prices that vary monthly. “Like many companies, we worked until this year with so-called variable prices that were fixed for six months,” said spokesman Pleun Papavoine. “From January, we will adjust the prices monthly for customers with a variable contract and also purchase the required quantity each month. This does mean that they pay more during this period, but if the rates fall, the customer benefits more quickly.”
About 10 percent of the more than 700,000 customers had a variable contract with the Nuts Groep and from now on they were offered the opportunity to pay varying rates on a monthly basis. “If they didn’t want that, they could take an annual contract, with prices fixed for twelve months. We thought it was quite exciting, but it went very well and we got few negative reactions.”
The rates are determined before the start of each subsequent month. Based on historical consumption, Nuts Groep – one of the top four energy suppliers in the Netherlands – will continue to work with installments in order to avoid too large differences in payments between the winter and summer months. “In this way we increase transparency for the customer, who can also cancel every month,” says Papavoine.
According to her, semi-annual contracts with a fixed price – the so-called variable rates – are especially risky for the supplier. “We gave the price guarantee for six months, while customers are free to switch every month. The contract was therefore unilaterally variable. That’s not a problem when prices are fairly stable, but now it means less risk for the company.”
We do not recommend people who are tight to go for variable prices
Sanne de Jong Gaslicht.com
Sanne de Jong of price comparison site Gaslicht.com understands that many people have accepted the Nuts Groep’s offer. “Meanwhile, the semi-annual variable rates have increased and are therefore comparable to the rates for one-year contracts. Sometimes the choice also depends on your wallet. We do not advise people who are tight to go for variable prices.”
De Jong calls the monthly varying rates “an interesting option, because you benefit sooner when prices fall. But you have to feel like a customer to keep a close eye on the rates.”
Normally, price comparison sites encourage people to regularly switch to another supplier, because they believe that ‘sleepers’ – who have been on the same contract for years – are more expensive in practice. “Now we warn people who were in a variable contract not to count themselves rich after the winter period. Anyone who then switches to a cheaper offer should bear in mind that he has already consumed most of his annual consumption with the old supplier. Then you have to pay extra when you leave.”
Also read the question: Will energy prices remain so high for the time being?
This additional assessment is a result of the installments or advances that the consumer pays monthly. In practice, this means that you pay too little in January – hence the aforementioned additional tax – and in July too much for the little gas you burn. The advantage of these fixed advances is that the monthly payments for most contracts are the same throughout the year.
In practice, these advances mean that the energy supplier is acting for the bank, says Thomas Hulshof, who founded Frank Energie two years ago. According to the former Eneco employee, current practice shows that advances also involve risks. “Energy companies usually go bankrupt before or at the beginning of the winter. The result is that consumers lose the money they paid extra in the summer months.”
It is one of the reasons for Frank Energie to offer dynamic prices. “These are the rates for gas and electricity that are established on the wholesale market. All energy companies buy in there. In practice, this concerns daily prices for gas and hourly rates for electricity,” says Hulshof. Recently, fintech investor Amsterdam Platform Creation (APC) became a shareholder of Frank Energie ‘for a significant interest’.
Those prices, which the interested consumer can follow on the internet, are passed on to the customer one-on-one. “Our merit is the 5 euros that we charge per product every month.” Anyone who purchases gas and electricity through Frank Energie therefore spends 10 euros per month on the company.
As mentioned, the prices for the customer move directly with the market: the app shows when the time has come to switch on the washing machine or charge the car. “That means that the customer uses electricity if there is a lot of green production. If they do that in large numbers, it is also good for the network because you prevent overload.”
Frank Energie is not alone in offering dynamic pricing. In the Netherlands, EasyEnergy, EnergyZero, NieuweStroom and Tibber are also active in this field. Last month has regulator ACM drawn up a code of conduct for these providers, given the additional risks for customers. A personalized offer should show that you pay more in the winter than in the summer.
According to Hulshof, dynamic prices are the future. “In Scandinavia this model is already the standard. With all the smart meters, that is also possible here.”
Particularly in recent months, the historic price increases have led to nervousness at the kitchen table. “If the customer finds it too exciting, he can leave at any moment. The notice period is zero days,” says Hulshof. In the winter, the rates of providers such as Frank Energie are higher. “This is not only due to the current market situation, but also because we do not have fixed advances. We only work with so-called dynamic advances: prior to each month we estimate the costs and consumption. The customer pays that amount and we settle it afterwards.”
That means that the bill in January is three times higher than in July. The consumption in November is exactly the same as the average monthly consumption in a year. „The advantage for the customer is that the spot prices [op de dagmarkt] historically lower than the fixed prices normally charged. And we don’t make money from purchasing.”
According to De Jong of Gaslicht.com, dynamic prices are not for everyone. “You almost have to make it a sport to keep up with that and also enjoy it. And financially, not everyone is able to pay for their actual consumption in the winter months.”
At the beginning of last year, the Texas energy crisis showed that consumers sometimes lost tens of thousands of euros, as a result of the dynamic prices. “That’s right, but the situation in the US is completely incomparable with the European one,” says Hulshof. “That applies to the extremely low temperatures, but certainly also to the unstable energy grid in Texas. Supervision of the market is also incomparable with the situation here.”
The recent high prices in the Netherlands did cause shocked customers to sound the alarm. “We are going to talk to them,” he says. “And with regard to the coming period: I think we have had our price ceilings in December.”
A version of this article also appeared in NRC on the morning of January 13, 2022
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