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ACM publishes new rules for early termination of fixed-term energy contracts

The Netherlands Authority for Consumers and Markets (ACM) has set new rules regarding early-termination fees. These new rules will apply to early terminations of fixed-term contracts with fixed rates for electricity or natural gas. They rules are aimed at making sure that such fixed-term contracts will be offered again. The new rules will come into force as soon as the necessary legal and technical changes have been completed so that, when terminating their fixed-term contracts, consumers are automatically informed about the level of the early-termination fee. This is expected to be ready by April 1, 2023.

Energy suppliers already indicated before that they would not be ready before April 1, 2023 to offer new fixed-term contracts because they need to adjust their IT systems to the measures related to the price cap announced by the Dutch government. ACM has already published these rules so that energy suppliers and other market participants are able to prepare themselves for the new way in which termination fees are set. The current rules will continue to apply to fixed-term contracts that have been taken out before April 1, 2023.

Energy suppliers can only charge a fee for early terminations of fixed-term contracts with fixed rates. In the new system, consumers cover the losses that suppliers incur as a result of early termination. Now that this risk will be covered, suppliers are expected to start offering fixed-term contracts again.

The maximum termination fee will depend on the amount of energy that the consumer would still have taken out according to the old contract, and on the price difference between the rates in the current contract and the most recent rates for the same contract with the same supplier. The new termination fee is therefore low if the remaining amount of energy is low or if the difference between the rates is small. The termination fee can thus be higher if the remaining amount of energy is higher or if the price difference is larger.

ACM adjusts the rules for termination fees because energy suppliers have indicated not to offer fixed-term contracts anymore because the purchase prices are high while consumers now have to pay a small, fixed termination fee if they terminate their fixed-term contracts early, for example 50 euros at the most if a consumer has less than 18 months left on their contract. Suppliers are worried that, because of the low termination fee, buyers with fixed-term contracts will switch suppliers as soon as energy prices go down. Suppliers would then be stuck with energy that they had purchased at higher prices and which buyers had promised to take out.

Extra measures for protecting consumers

ACM finds it important that, when switching energy suppliers, consumers are properly informed about the level of the early-termination fee. In that context, the Information Code for Electricity and Natural Gas (In Dutch: Informatiecode Elektriciteit en Gas) as well as the suppliers’ technical systems need to be adjusted, ensuring that, when a consumer takes out a new contract, the new supplier informs the old supplier about the switch. The old supplier is then required to inform the customer immediately about the level of the early-termination fee. If a customer cannot or does not wish to pay the early-termination fee, they can still decide not to sign the new contract, and continue with the old contract instead.

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