Finding a cheaper energy tariff doesn’t necessarily mean you should switch.

If you’re currently on a fixed tariff, your supplier may charge an exit fee if you leave before the end of the agreement.

That creates a simple question:

Will the money you save by switching be greater than the exit fee you have to pay?

Sometimes the answer will be yes.

Sometimes the tariff that looks cheaper will barely save you anything once the exit fee is included.

The important thing is to compare both options on the same basis.

What is an energy tariff exit fee?

An exit fee is a charge that can apply if you leave certain energy tariffs before the end of the contract.

It is most commonly associated with fixed tariffs.

Your tariff information should tell you whether an exit fee applies and how much it is. Ofgem describes termination or exit fees as contractually agreed charges that may be payable when a customer terminates a contract before its agreed end date.

Not every tariff has an exit fee, and the amount can vary.

For a dual-fuel customer, it’s also important to check whether the fee applies per fuel.

For example, a tariff could have:

• £50 electricity exit fee

• £50 gas exit fee

Leaving both could therefore cost £100, not £50.

Don’t compare the exit fee with the headline saving

Suppose you’ve found another tariff that appears to be £150 cheaper.

Your current tariff has a £100 exit fee.

It would be tempting to calculate:

£150 saving − £100 exit fee = £50 better off

But first we need to know whether that £150 is a meaningful comparison.

As we explained in Why a £200 energy saving might not actually save you £200, a quoted saving is still an estimate.

It may depend on assumptions about your consumption, comparison period and what you would otherwise have paid.

A better approach is to calculate the cost of staying and switching using your own energy consumption.

Start with the cost of staying

Imagine you have six months remaining on your current fixed tariff.

Based on your expected electricity and gas consumption over those six months, staying on the tariff is estimated to cost:

£900

Now suppose another tariff would cost:

£790

over the same six-month period.

The potential saving before the exit fee is:

£900 − £790 = £110

So far, switching looks worthwhile.

But we haven’t included the cost of leaving.

Now subtract the exit fee

Suppose your total exit fee is:

£75

The calculation becomes:

£110 potential tariff saving − £75 exit fee = £35 net saving

Switching could therefore leave you around:

£35 better off

—not £110 better off.

That’s the number that matters.

The exit-fee calculation

A useful way to think about it is:

Net switching benefit = cost of staying − cost of switching − exit fee

Using our example:

£900 − £790 − £75 = £35

If the result is positive, switching is estimated to leave you better off financially.

If the result is negative, paying the exit fee would cost more than the tariff saving.

For example:

£900 − £850 − £75 = −£25

The new tariff is £50 cheaper before the exit fee.

But after paying £75 to leave, you would actually be approximately:

£25 worse off

Switching to the tariff with the lower advertised cost would therefore not be the cheaper decision.

What is the break-even point?

There’s an even simpler way to look at this.

If your exit fee is £75, the new tariff needs to save you more than £75 over the relevant period before switching produces a financial saving.

That £75 is your break-even point.

Potential saving of £40?

Don’t pay £75 to save £40.

Potential saving of £75?

You are approximately at break-even.

Potential saving of £150?

After the £75 exit fee, the estimated benefit becomes:

£75

This is why an exit fee should not automatically stop you switching.

Citizens Advice specifically advises people who face an exit fee to check how much they would save by switching, because the saving can be greater than the fee.

The remaining contract period matters

There’s another important part of the calculation.

Don’t necessarily compare the two tariffs as though you will pay both for a full year.

If your existing tariff ends in three months, the relevant question may be:

What will staying cost me for those three months compared with switching now?

Consider a £100 exit fee.

A new tariff might appear to save £200 over a full year.

But if only three months remain on your existing contract, you won’t necessarily lose £200 by staying until it ends.

The saving available during those remaining three months could be much smaller.

This is another reason headline annual savings can be misleading.

Your energy use during those months matters too

Energy consumption isn’t evenly distributed throughout the year.

A household with gas heating will generally use considerably more gas during colder months than during summer.

So three months from December to February shouldn’t necessarily be treated in the same way as three months from June to August.

Ideally, the comparison should use the energy you are likely to consume during the remaining period of your existing tariff.

If that isn’t available, an annual estimate can still be useful — but you should understand its limitations.

You may be able to leave without paying an exit fee

Before doing any calculation, check how long remains on your fixed tariff.

Citizens Advice says that if you have 49 days or less remaining, you can switch without paying an exit fee. If 50 days or more remain, an exit fee may apply, so you should check your tariff or ask your supplier.

This protection reflects Ofgem’s switching-window rules, under which suppliers cannot charge an exit fee for switching during the final 49 days of a fixed-term contract.

That means someone approaching the end of a fixed deal may not need to choose between:

stay and wait

or

switch now and pay the fee

They may already be able to switch without paying it.

What if the saving is only slightly bigger than the exit fee?

Suppose:

Potential tariff saving: £110

Exit fee: £100

Net estimated saving:

£10

Technically, switching appears cheaper.

But £10 is a very small margin.

Tariff comparisons are based on assumptions about future consumption, and your actual usage may differ.

A small calculated advantage shouldn’t necessarily be treated as a guaranteed saving.

This is where the distinction between cheaper on paper and meaningfully cheaper for you becomes important.

The same principle applies when deciding whether staying with your existing supplier or switching elsewhere offers the better outcome.

What should you check before paying an exit fee?

Before switching, check:

• your current tariff end date

• the exit fee for electricity and gas

• your current unit rates and standing charges

• the new tariff’s unit rates and standing charges

• your energy consumption

• how long remains on your existing tariff

• whether you’re already inside the 49-day switching window

• whether the new tariff itself has an exit fee

Ofgem also advises consumers to choose tariffs according to their energy use and individual circumstances rather than looking at the tariff price in isolation.

So, is it worth paying an exit fee to switch?

It can be.

The existence of an exit fee doesn’t automatically mean you should stay.

And finding a cheaper tariff doesn’t automatically mean you should switch.

The useful comparison is:

What will staying cost me?

versus:

What will switching cost me, including the exit fee?

If the difference is substantial, paying an exit fee could still leave you better off.

If the difference disappears once the fee is included, staying may be the better option.

And if you’re approaching the end of your fixed tariff, check whether you can already switch without paying an exit fee at all.

If an exit fee applies, our Energy Tariff Comparison Calculator can show the annual energy costs separately and then show how the fee changes the comparison.

Compare the decision, not just the tariff

Likewise Compare is being built around a simple principle: energy tariffs should be compared using the information that affects what your household could actually pay.

That means looking beyond the headline saving to your consumption, unit rates, standing charges, tariff period and relevant fees.

Because a tariff that is £110 cheaper isn’t really £110 cheaper if it costs you £75 to get there.

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