Should you choose a fixed or variable price for electricity?

Should you choose a fixed or variable price for electricity?
Should you choose a fixed or variable price for electricity?
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Last week, EnergyVision was the first energy supplier with a ‘fixed-variable contract’ for electricity. For the time being, only people who own a home with a suitable roof but do not yet have solar panels can sign up for the contract. We started looking for alternatives.

“EnergyVision’s new contract is causing headaches for many people in the sector,” says Kris Voorspools, energy specialist and manager of the energy consultant 70 GigaWatt. It is not easy to judge EnergyVision’s offering, because it is “a unique product” that “doesn’t exist anywhere else in the world”, as the company itself puts it.

EnergyVision, which receives the support of Marc Coucke as an investor, uses three electricity rates in the contract. For the first 1,000 kilowatt hours (kWh) of electricity you use, you pay 0.293 euros per kWh. That price is fixed for ten years. For consumption above 1,000 kWh, you pay 0.2 euros per kWh for the electricity generated by the solar panels that EnergyVision places on your roof, and a variable price for the electricity from the grid (0.297 euros on April 29). EnergyVision also gives a temporary discount of 100 euros.

Other contracts with low, fixed prices

There are energy suppliers who offer a fixed price for one year, but no supplier promises that for ten years. EnergyVision now does that, but only for the first 1,000 kWh per year. EnergyVision says it can fix that fixed price at 0.293 euros per kWh, because it has its own wind turbines and approximately 2 million solar panels that generate energy. EnergyVision dips below the lowest fixed price offered on the market.

During the energy crisis in 2021-2022, no Belgian energy supplier offered a fixed price electricity contract. Since January 2023, one supplier after another has restarted fixed-price contracts for one year, and exceptionally for two years, but never for ten years. To find out the lowest rate for your specific consumption pattern, it is best to complete the V-Test yourself. In this article you can read how to best approach this.

Perhaps a factor is that EnergyVision can retain customers for a long time, while other energy suppliers cannot. “Since 2012, energy suppliers are no longer allowed to charge a termination fee,” says Kris Voorspools. The energy specialist previously pointed out that abolishing this compensation has undesirable side effects. Energy suppliers can offer a lower fixed price if they are sure that a customer will remain loyal for several years. They can then better protect themselves against price fluctuations.

Kris Voorspools: “EnergyVision does not charge a termination fee on the energy contract, but organizes a kind of tying of energy and solar panels, which means that its customers cannot easily change energy suppliers. Families can only cancel their energy contract with EnergyVision if they pay a lump sum for the solar panels.”

If energy prices drop sharply in the future for some reason, customers may well be better off with a new contract with a lower fixed or variable price. “The energy market is an uncertain market. No one knows with certainty what prices will do in the next ten years,” says Kris Voorspools.

Only temporarily the lowest variable price on the market

Anyone who completes the comparative V-Test of the Flemish energy regulator (VREG) will notice that the EnergyVision energy contract is at the very top of the variable prices. “But without the one-off discount of 100 euros, EnergyVision is already declining,” notes Kris Voorspools. Next year, EnergyVision may no longer be the most affordable supplier. “In addition, this contract deprives people of the opportunity to benefit from falling energy prices.”

Testaankoop also says that without the welcome discount, some other variable formulas are cheaper. “But you cannot compare them one on one, because EnergyVision’s offer offers more certainty for a longer period than traditional contracts.”

“We have not yet been able to analyze the EnergyVision contract in detail,” responds Vincent De Dobbeleer, CEO of June Energy. That company helps its customers to compare energy contracts and regularly switch suppliers. “So we don’t know whether customers are better off or not. We do not necessarily think it is wise to commit to the same energy supplier for thirty years, because 70 percent of our customers save between 400 and 800 euros by using June Switch and switching suppliers two or three times a year. Then staying with one supplier for thirty years is a very long time.”

Vincent De Dobbeleer is committed to EnergyVision’s mission: including everyone in the energy transition. “The EnergyVision contract could be interesting for a limited target group,” he believes. “But for many more people, regularly changing energy supplier and keeping an eye on discounts and temporary promotions is even more interesting.”

Kris Voorspools has an even more outspoken opinion. “The energy transition will bring great opportunities. I seriously doubt it’s a good idea to chain yourself to one solution for more than a decade. By doing so you deny yourself the opportunity to ever seize better opportunities.” He refers to the futures market, where energy suppliers can buy electricity for delivery at a later date. “Power for delivery next year is currently worth 85 euros per MWh. For delivery within three years, this is still 70 euros per MWh. The valuation of 200 euros per MWh for self-consumption over the next 30 years is quite high compared to what is common on the market.”

Also read Test-Aankoop’s analysis of EnergyVision’s new energy contract here:

The article is in Dutch

Tags: choose fixed variable price electricity

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