ACM intensifies its oversight over the consumer energy market: extra attention to contract availability and to the stability of suppliers

The Netherlands Authority for Consumers and Markets (ACM) will keep an extra close watch on developments on the energy market in response to the steep price increases on the wholesale markets for natural gas. ACM monitors the availability of energy contracts, and pays specific attention to the financial positions of energy suppliers.

Due to the uncertain global developments, it is currently not possible to predict how the market will evolve over the next few days and months. What contract is best for households depends on personal circumstances and preferences. Now is a good time to think about this. ACM recommends consumers always to make an assessment themselves on the basis of a close comparison of different types of contracts and suppliers. As market participants may also take unfair advantage of the current period of uncertainty, ACM reiterates its warning about misleading telemarketing and doorstep-selling practices involving energy contracts. Unsolicited offers are rarely the best option. That is why it is always important to take your time to compare offers, and not to accept a new contract during a sales conversation.

Consequences of increasing prices

The type and length of their contracts determine at what point in time households will start noticing the effects of an increase in the natural-gas price on their pocketbooks. ACM’s Monitor on the consumer energy market shows that 54 percent of all households have a fixed contract, 39 percent have a variable contract, and seven percent have a dynamic contract. A fixed contract really is a fixed contract, and suppliers cannot adjust the price thereof before the contract has expired. For variable contracts, the price can be adjusted if this has been clearly stated in the contract. However, suppliers must always announce price changes at least one month in advance, so that consumers are able to prepare for them, and they have the opportunity to terminate their contracts before the price change takes effect. Dynamic contracts directly follow the price on the wholesale market. Consumers with this type of contract therefore do notice the effects of price increases and decreases on their pocketbooks straight away.

Oversight over contract availability

ACM has seen that, over the past several days, some suppliers have stopped offering fixed contracts. At this point, some of these suppliers have resumed offering fixed contracts. As prices for contracts follow the prices on the wholesale markets, ACM has seen that, in a short amount of time, many prices went up, and suppliers offered fewer discounts. ACM continues to keep a close watch on the offerings of suppliers. The Dutch Energy Act stipulates that suppliers must, in any case, always offer two types of model contracts: a model contract with variable rates and a model contract with fixed rates for one year. After April 1, ACM will check whether all suppliers offer these mandatory model contracts. In addition, ACM will discuss with suppliers that do not yet offer any model contracts about how they can do so as soon as possible, where possible before April 1.

Oversight over rates

Energy suppliers can set their own rates as long as those rates are reasonable. This means that they are allowed to incorporate the costs they incur into their rates. ACM keeps a close watch on the rates charged by energy suppliers, and publishes these each month in the Monitor on the consumer energy market. As part of this oversight, ACM looks at, among other aspects, price differences between suppliers as well as the reasons for these differences. If ACM sees that the rates for certain contracts are significantly higher than those for comparable contracts, ACM publishes about this in the monthly Monitor on the consumer energy market.

Oversight over the financial stability of suppliers

Suppliers must be able to absorb sudden price shocks on wholesale markets, and must ensure that they are able to comply with their obligations. ACM keeps a close watch on the suppliers’ equity positions, and checks whether they have sufficient funds available to pay their short-term bills. ACM also checks the suppliers’ purchasing strategies to check whether they have purchased natural gas and electricity on wholesale markets on time for the contracts they have concluded with customers. ACM intensified its financial oversight over energy suppliers in 2022, and conducts checks on all energy suppliers every six months. If necessary, ACM will conduct an in-depth investigation, or impose measures on businesses. In addition to these regular oversight efforts, ACM will, in the next few months, keep an extra close watch on the financial positions of suppliers. The tightened financial rules for suppliers laid down in the Dutch Energy Act as well as ACM’s tightened financial oversight of the past couple of years have considerably reduced the likelihood of suppliers going bankrupt.