They have come back from a (temporary) shortage: energy contracts with long fixed prices. These were hardly available last year due to the energy crisis, but now that is slowly starting to change as gas prices have dropped a bit.
Providers are only offering these on a small scale for now, but there will likely be more offerings in the coming months. Experts say it can be beneficial for many people.
energy crisis
The Russian invasion of Ukraine plunged the energy market into crisis: Russia was no longer a major supplier of gas and prices soared. This made it impossible for suppliers to offer open-ended contracts. Because the tariffs they will charge for this will soon be very low again.
Therefore, anyone who wanted to make a new energy contract had to resort to variable contracts, the price of which was adjusted several times a year. Over the past year, prices have skyrocketed for many households. The cabinet has set a price cap to assist them.
But now that gas purchase prices have dropped, providers are once again entering into open-ended contracts. “For example, there are already a lot of contract offers with a fixed price of one year,” says Hans de Kok of price comparison portal Pricewise.
Energy contract prices are also falling. “We assume that prices will fall below the price ceiling,” De Kok says. For anyone with a variable contract, this can quickly translate into lower energy bills.
Whether it makes sense to move to a perpetual contract depends on many factors. For example, a fixed energy contract (with a term of one year) is not yet available to everyone. They are only available from small suppliers Mega, Innova and HEM. However, De Kok said, “They only get a limited amount of gas, which means they cannot offer such a contract to everyone. The rule is this: He’s gone.”
The companies told Nieuwsuur that Essent and Vandebron have also recently started offering permanent contracts again, but only for some of their own customers. De Kok: “The energy market is still turbulent, so they only sell fixed contracts very specifically to a certain group.”
If you belong to this elite group, De Kok says it can be “definitely interesting” to opt for this fixed price with a relatively low fare. “The upper price limit is only valid for this calendar year 2023. Anyone who chooses a fixed price for one year now will have a fixed price later on.”
Higher referral penalty
Energy economist Hans van Cleef says providers are still reluctant to offer fixed contracts because the market is “not very stable yet.” “Prices are significantly lower than last summer as gas reserves are well stocked. However, uncertainty in the market is still very high.”
Van Cleef says it largely depends on China whether Europe can keep its gas reserves full. “Last year we were able to buy a lot of LNG, liquefied gas that actually goes to China. Because China was in isolation and the economy was not working properly. But now the economy is picking up again, that’s there automatically.” Less LNG is available for Europe. Then there can be bottlenecks, which will drive prices up.”
However, the Dutch are expected to be able to conclude more permanent agreements in the coming months. The reason: Customers will soon have to pay higher penalties if they want to end their permanent contracts early, which means additional money for suppliers. Eneco, Vattenfall, Oxxio and WoonEnergie tell Nieuwsuur they will again offer permanent contracts once this deal is complete.
You can now exit a permanent contract for around 50 euros per product (gas and electricity). The new rules aim to prevent all customers from switching to a cheaper contract in the event of sudden price cuts. The energy company is then left with expensively purchased energy and may even collapse. De Kok recommends considering a change “while cancellation fees for fixed-price contracts are still relatively low.”
Chances of lower prices after 2025
Energy economist Van Cleef expects energy prices to remain relatively high in the coming years. “The main reason is that the overall gas supply is decreasing, because Russia is no longer one of the big players.”
Going into 2025 or 2026, he says, “it will continue to be a very tight market with upside price risks.” “In 2025, several major gas projects will be available, most notably in Qatar. Also, current efforts to use sustainable energy sources and energy more efficiently will then really accelerate. Then there will be a little more room in the market.”
Source: NOS
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
