Starting from 1st June, new legislation will come into effect that allows fixed contracts to have longer durations, lower rates, and higher penalties for switching.
At our company, you will soon be able to take advantage of these fixed contracts, ensuring stable rates over extended periods. But what does this mean exactly?
In recent times, energy suppliers offered limited to no contracts with fixed rates. Instead, it became common to provide variable contracts with monthly price changes. If a fixed contract was available, it often had a duration of less than 1 year. However, the government wants Dutch consumers to have the option again to enter into contracts with fixed rates for 1, 3, or even 5 years.
To achieve this, the penalties consumers pay for early termination of their contracts need to be adjusted. This is due to the difference between the purchase and sale prices that suppliers need to compensate. The old penalty model was known as ROVER: Reasonable Termination Compensation Permit Holders. From 1st June 2023, this will be replaced by ROVER 2023.
1. Previous Model: ROVER
Until 1st June, a consumer received a relatively small penalty if they terminated their contract early. The penalty amounts varied, with a maximum of €125 per product. So, if you had both gas and electricity, the maximum penalty would be €250. In the past, this penalty was reasonable and covered a portion of the supplier’s margin loss. However, with the current developments in rates, this penalty no longer covers the margin loss adequately. Therefore, a new penalty model has been designed.
In the table below, you will find the amounts of the termination penalties before 1st June 2023. The termination fee amount is per product and depends on the remaining duration of the agreement.
|< 1.5 years||€50.00|
|1 – 2 years||€75.00|
|2 – 2.5 years||€100.00|
|2.5 years >||€125.00|
2. nieuwe model: ROVER 2023
2.1 How does ROVER 2023 work?
The penalty model is being adjusted to compensate energy suppliers for the profit margin loss they experience when consumers terminate their contracts early. Therefore, the termination fee will be in line with the supplier’s profit margin loss.
The following formula is used for this purpose:
Termination Fee = (agreed price – price of the reference product offer) x remaining quantity.
The reference product is a current product that closely matches the product the consumer currently has. It takes into account the duration and type of energy (grey/green). If no reference product is available, the product with the highest rates from an energy supplier is used. If the price of the reference product offer is equal to or higher than the agreed price, no termination fee may be charged.
The amount of the switching penalty will now be significantly higher than what everyone was accustomed to in the previous situation.
2.2 Registration Process
After the consumer enters into a contract with the new energy supplier (with a cooling-off period of 14 days), the new supplier must immediately report this to the Contract End Register (CER). Within these 14 days, the old energy supplier must inform the consumer about any potential termination fee and its amount. This may be an estimate, as the final termination fee can only be determined after the consumer has been supplied by the new supplier.
Lastly, energy suppliers must always provide their customers with the option to request an estimate of the termination fee. This will be made practically available through the customer portal of an energy supplier.
3. Positive effect of ROVER 2023
With the implementation of the new legislation, energy suppliers will have the opportunity to offer long-term fixed contracts again, with durations of multiple years.
Since the majority of households in the Netherlands currently have variable contracts, it is expected that there will be significant activity. Consumers will have the option to enter into a fixed contract with their current supplier or a new supplier.
In addition to providing consumers with more choices regarding fixed contracts, ROVER 2023 will also have a positive effect on the rates consumers have to pay. With ROVER 2023, it is expected that more consumers will fulfill their contracts in full. This allows energy suppliers to reduce a portion of the risk premium from the rates, as there is greater certainty that the purchased energy will indeed be delivered to those consumers.
Apart from the above, geopolitical developments will continue to have an impact on rates, both positively and negatively.
Starting from 1st June 2023, ROVER 2023 comes into effect, bringing about some significant changes:
- Termination penalties will differ significantly from the current penalties. They will primarily apply in a declining market.
- Once a consumer enters into a new energy contract, the new supplier must immediately notify the Contract End Register (CER). This notifies the old energy supplier.
- The old energy supplier must inform the consumer “immediately” about the estimated amount of the termination fee.
- Consumers must always have the option to inquire about the amount of the termination fee, especially when they intend to switch to another energy supplier.
- A positive outcome of ROVER 2023 is the increased availability of fixed energy contracts with lower rates. This provides consumers with more options.
- With the implementation of ROVER 2023, the aim is to achieve a more transparent and flexible energy market, where consumers are better informed about termination penalties and the possibilities of fixed contracts with favourable rates.