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ACM: number of households with variable-rate energy contracts keeps on growing

Over the past six months, the percentage of households with variable-rate contracts for electricity and/or natural gas has risen from 50% to 56%. This is one of the conclusions of an analysis carried out by the Netherlands Authority for Consumers and Markets (ACM). Households with variable-rate contracts feel the pinch of rising energy prices sooner because their energy suppliers are able to adjust their rates twice a year (or more often if market circumstances so dictate).

The marked increase in the number of variable-rate contracts (approximately 400,000 households in six months) is caused by the fact that the fixed-rate contracts (with fixed rates for 1, 3 or 5 years) of more and more households are expiring, and suppliers do not or hardly offer any new fixed-rate contracts. Energy suppliers say they have stopped offering such contracts due to the current price volatility and instability in the energy market. As a result thereof, it has become riskier and more expensive for energy suppliers to fix their purchasing prices for a longer period of time. That is why energy suppliers have decided to offer variable-rate contracts only, for now. However, consumers must, at all times, be able to take out, at least, a variable-rate contract with any supplier (this is referred to as ‘the model contract’). Energy suppliers must ensure that these model contracts with the most up-to-date rates can be easily found on their websites.

Raising or lowering the monthly payments

Through its consumer information portal ACM ConsuWijzer, ACM receives many questions about energy suppliers that increase the amount of the monthly payments that consumers need to pay. With these monthly payments, consumers pay for the annual final bill in advance on a month-by-month basis. In effect, the monthly payments are advance payments for the final bill. Suppliers may raise the amount of the monthly payments if energy rates go up or if a customer’s energy consumption turns out to be higher than previously estimated. ACM finds it important that energy suppliers explain clearly why it is necessary to raise the amount of the monthly payment, so that consumers are able to verify this themselves.

ACM points out to consumers that it is unwise to lower the amount of their monthly payments just like that. The idea behind monthly payments is to spread out the total energy bill over an entire year in order to avoid paying much more in winter and paying much less in summer. In addition, paying the right amount each month ensures that, when the final bill is sent, consumers are not suddenly confronted with a high outstanding balance. If consumers paid too low payments each month, suppliers would still charge those consumers the remaining costs for electricity and/or natural gas in their final bills.

If it turns out that, when receiving their final bills, consumers have paid too much with their monthly payments, suppliers will pay refunds to those customers. ACM also advises consumers not to raise the amount of their monthly payments unnecessarily, and not to use this as a quasi-savings account with their energy suppliers.

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