What are exit fees?

Exit fees can also be referred to as termination or cancellation fees.


They are fees that are often included in fixed energy tariffs by suppliers. The fee is charged to a customer when they leave before the end date of the plan. For example you may have committed to a 12 month fixed plan with an energy provider with an exit fee of £30. If you left the plan after 6 months, you would be liable to pay £30 to leave early.


You can switch up to 49 days before the end of your contract without paying an exit fee


All suppliers must notify customers on their fixed tariffs 42-49 days before the upcoming end date, which is in accordance with Ofgem regulations:


“You will receive a notice 42-49 days before the end date of your fixed term tariff to inform you that your tariff is coming to an end. Should you choose to switch after this point, suppliers can’t charge you a termination fee.”


So in fact you can switch earlier than the fixed end date, which is excellent news for customers. Remember, it still can take at least 3 weeks to fully switch suppliers, so do this as early as possible during the notice period in order to take advantage of a better rate.


If you have requested the switch within this 49 day window, you should not be charged an exit fee unless one of the below exceptions apply:


1) You have already entered into a new Fixed Term Supply Contract with your current supplier

2) Any of the circumstances included in section 22C.5 of Ofgem’s Electricity (p.143) and Gas (p.135) supply standard license conditions apply to you


In any case, please contact your current supplier if you are unsure whether exit fees will be applied to your specific switch. They will be in the best position to fully confirm whether this is the case.


Why do energy suppliers include exit fees?


It is generally recognised that fixed plans offer the best financial value for customers. This is because customers are committed for longer, and many suppliers are able to purchase for their energy needs much further in advance, which has the overall effect of bringing costs down. Therefore if a customer leaves that fixed plan early, the supplier may have unsold energy left over, and so they put an exit fee in place in order to financially protect themselves.


Should I switch earlier even if I incur an exit fee?


If you want to leave your plan early, it can still make financial sense to pay the exit fee. For example if your plan is estimated to save you £100/year, and you have an exit fee of £30, you will still be saving £70. In addition, some suppliers in fact pay your exit fee as an incentive to move on to one of their plans.


Some customers may have other non-financial reasons for wanting to leave a plan early. For example they may have had a poor experience, and want a better customer service. In this example, you should weigh up whether incurring the cost of an exit fee is worth having a better customer service. When submitting your information about your energy needs, Lumo provides you with the ability to prioritise factors such as this.


What if I want to cancel my switch?


If you’ve decided that you want to cancel your switch, read our article here.


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