Why do variable rates change each month

Have you subscribed to a variable rate electricity or gas deal? Since January 2018, you can expect changes in rates every month and therefore a more complicated energy bill.

In October 2017, the Michel government had a surprise for Belgian consumers. It decided to withdraw, from 31 December 2017, the safety net mechanism implemented during the previous Parliament, resulting in an energy market that was less transparent in terms of the prices offered.

Variables rates under control between 2013 and 2018

Just to remind you, the indexing of variable tariffs for electricity and gas greatly depends on the evolution of wholesale gas and electricity prices. Due to their significant volatility in Belgium, it was decided in January 2013 to protect consumers by establishing a safety net mechanism

Thus for several years, the CREG ensured due variable price indexing. It should be understood that providers were not allowed to use just any parameter and were only allowed to index prices every three months. Furthermore, the federal regulator also seeked to ensure that electricity prices and gas prices did not exceed those of our neighbouring countries. Thanks to these measures, not only could the energy component of consumers’ bills not shoot up but the energy market was also minimally transparent.

But since 2018, each provider can now use different formulas

For a variable rate energy contract, consumers are finding different annual fluctuations upon receipt of their regularization bill. This will remain so in the future, but on the other hand, the safety net mechanism is now no longer in place.

Specifically, since January 1st 2018, suppliers have the right to index their variable gas and electricity prices monthly. In addition, they may again use the indexing parameters of their choice. All the more need for the prices taken into account to be directly linked with the gas and electricity wholesale markets.

The government justified this decision by stating that it wishes to “bring the bill closer to the market reality” since gas and electric costs vary greatly from season to season. In truth, they vary even according to the time of day. It is, for example, for this reason that the providers are already offering a more attractive electricity tariff for nights and weekends, i.e., when demand is lower, to customers with a dual meter.

>> Read also: Fixed price or variable price? Which should you choose for your energy contract?

How will this affect consumers?

In practice, this system leads to less stable prices, as they can increase or decrease more regularly, and it signals the return to a complex market. Indeed, it may be more difficult to understand and anticipate the evolution of your invoice and to compare gas and electricity deals. With such short-term visibility, it is more difficult to find out which power provider is actually the cheapest, especially if the composition of these formulas is not publicly and explicitly displayed.

Remember, the aim of the liberalization of the market was to stimulate competition and get customers to switch gas and/or electricity supplier. However, in view of a lack of transparency and opaque functioning, they risk becoming immobile on the market. Why? Because the unknown can frighten! What with the fear of doing wrong, of paying even more money to another company or having your gas or electricity cut off, some people prefer not to touch anything and remain a customer with the same supplier.

There is a solution, however: to choose an electric or gas contract at a fixed price. Comparing this type of formula is easier because the supplier has the obligation to guarantee the same prices throughout the duration of your energy supply contract.

>> Compare your prices to find out if you pay too much for your energy !

Would you like to find out what kind of deal is right for you? Do not hesitate to call us on 0800 37 456, our staff will take the time to analyse your situation and calculate the amount of your potential savings!