The second electronic mail you’ll ever obtain as an Octopus Power buyer is from me. It talks about how I set Octopus as much as be completely different. How we work to do higher by prospects.
“We’ll do our greatest to take care of you with transparency, truthful pricing, sound recommendation on vitality saving, and no lengthy calls to name centres.
No exit charges, no lock-in contracts, and most significantly, no large value hikes after the primary 12 months.”
Six years after I wrote these phrases, I’m proud to say we’ve finished what I stated we’d. Clients with us because the starting would’ve usually saved over £1,000 (these are prospects who joined us in 2016 on our very first Fastened tariff after which moved to our Versatile Octopus for the following 4 years vs doing the identical factor with one of many authentic Huge 6 firms: British Gasoline, E.ON, EDF Power, Scottish Energy or Ovo Power). We’re one of many UK’s high manufacturers for customer support, and we’ve taken our sound vitality saving recommendation to new ranges this Winter to save lots of prospects thousands and thousands on gasoline payments.
We nonetheless work exhausting to be sincere and clear always. That’s why I’ve to let you know about a technique we have now modified from what I wrote again then.
We’ve got, as we speak, launched a brand new tariff that does have an early exit price, alongside all our standard tariffs with out one.
I needed to elucidate the rationale why.
We’re in a once-in-a-generation vitality disaster. The final time costs spiked like this was within the Nineteen Seventies. Gasoline costs have shot up as a result of a cocktail of world components, from geopolitical tensions to excessive climate situations.
It’s left the UK with a £20 billion gasoline invoice.
Power firms have been swallowing the debt for the previous six months. Power margins are slim to start with (we normally make round 5% on a typical buyer and that each one goes in the direction of our working prices). Up to now few months, we’ve spent £100 million to cowl the upper vitality prices and maintain prospects’ payments as little as potential.
We’re lucky to be ready the place we are able to take that hit. The vast majority of different vitality firms aren’t. 27 suppliers went bust in 2021; that’s half of the retailers out there.
This displaced over 6 million prospects, leaving them on the mercy of complicated, pricey emergency processes to maneuver them to a distinct provider.
All through all this, the vitality value cap has been a vital safety for patrons on default tariffs. Just lately, Ofgem introduced that the utmost cap would rise by almost £700, impacting round 22 million households.
We all know these payments are untenable for therefore many individuals. I’ve been speaking to the federal government for months about the easiest way to help prospects by means of this: the whole lot from spreading prices over a variety of years, eradicating the environmental levies and VAT from gasoline, and even extending the £140 Heat Dwelling Low cost to extra folks. The authorities’s since introduced a primary resolution, and I hope there is likely to be extra to return.
On the identical time we’ve been serving to our prospects immediately. We created a £2.5 million Monetary Hardship Fund for these struggling probably the most, and even run free schemes like loaning thermal cameras to identify warmth loss within the residence. Our staff has round 30,000 conversations with prospects daily, and so they’re skilled to establish individuals who’d profit most. And we have constructed a easy software meaning any buyer can discover and entry assist that is out there to them.
July 2023 be aware:
The three 12 months tariff this text refers to was an uncommon tariff that allowed us to supply prospects decrease charges early within the vitality value disaster. As of July 2023 it is now not out there, however we do have a 12 month mounted tariff with exit charges.
Whereas costs are beginning to come down, no-one can really predict the long run. Some prospects simply can not afford for costs to rise once more, so to assist with that we’re providing mounted time period contracts.
The mounted costs we provide can change unpredictably and commonly — typically each day — based mostly on the newest wholesale prices. While you sign-up to a set time period, we put aside a 12 months’s price of vitality for you — so if you happen to change your thoughts throughout that mounted time period and swap tariff or provider, there’s an early exit price that helps cowl that upfront price.
Within the present disaster, we are able to make vitality extra inexpensive proper now by shopping for long-term wholesale contracts in your behalf.
So, in addition to our standard 12 month mounted tariff with no exit charges, we’ll be trialling an extended mounted tariff for 36 months too. In unsure instances, we simply don’t know the place vitality costs will go from right here. However we do know an rising variety of folks merely cannot afford any extra rises.
This requires us to purchase three years’ price of vitality up entrance. In a current weblog our Director of Product Rebecca used the analogy of a ‘baked bean subscription’ to elucidate how vitality shopping for works. I’ll borrow it right here to elucidate why it means we have to add an early exit price to those long term tariffs:
Say you join a subscription of month-to-month baked bean deliveries over three years, for a similar value each month. Your baked bean vendor wants to ensure they will at all times afford to provide the beans for the agreed-upon value. So, they purchase all of your beans for these three years up entrance, and retailer them for you in a warehouse for while you want them. Meaning if you happen to depart your contract early, and determine to get beans from another person, the vendor is left with all these beans. They may promote your beans to another person, however now, the beans are price a lot much less in the marketplace, in order that they’ll promote them at an enormous loss.
Now think about that as an alternative of beans, it’s vitality, price £2,000 per 12 months for each buyer, and multiply that by doubtlessly 3 million accounts.
We have to add an early exit price for this long-term tariff in order that if you happen to determine to go away mid-contract, we are able to recoup a number of the prices we’ve already spent in your behalf. That’s why, on our 36 month Octopus Fastened tariff, the early exit price begins at £150 per gasoline in 12 months one, and can cut back by £50 yearly you keep on the tariff. The early exit price will apply if you happen to select one other tariff from us, or swap to a different provider.
These tariffs received’t be proper for everybody, and naturally we’ll maintain providing common 12 month mounted and versatile tariffs with out exit charges priced as affordably as potential.