Tackling hikes in energy prices
As speculation of possible government intervention is mooted in the run up to the General Election, the broken energy market is something we’re hearing about over and over again.
Energy prices are a political hot potato. Politicians come up with price caps and price freezes, but we still see reports in the media of energy companies bumping up their prices.
But until promises are put into practice we are stuck with what we have, and that’s rising costs.
EDF Energy, a “big six” supplier, increased prices in April – on top of an increase late last year. Other than British Gas, every big six company – and some smaller ones – have upped tariffs for consumers recently. One major supplier has pushed prices by 9.8%.
The hardest hit tend to be the seven out of 10 consumers on their company’s standard variable tariff. Many of these have never switched supplier despite over 20 years of price competition and countless adverts and advice. The least hardest hit are on fixed tariffs.
Recent Which? research has found that more than half (51%) of people said tackling issues around energy prices must be a top priority for the next government.
It is clear that millions of hardpressed energy customers are still suffering due to a lack of competition in the energy market.
Which? has found that from the start of May households could see energy bills soar by £416 in a year as 17 fixed tariffs from 10 suppliers (including seven with big six providers EDF, Npower and Scottish Power) are set to expire at the end of this month.
First Utility customers risk bills rising by the most. This is because the three fixed dual fuel tariffs with the biggest potential increase when they end are all from First Utility.
EDF Energy, M&S Energy, SSE and Scottish Power customers with deals ending could also see bills jump up by more than £350 over the next year.
When fixed tariffs come to an end customers risk being automatically moved onto standard variable tariffs.
These are typically the most expensive tariffs offered by a supplier.
This would be an increase by 55% over a year if consumers take no action to switch tariffs.
With energy prices having increased more than 40% for gas and 35% for electricity over the last 10 years, measures that significantly reduce the cost of consumers’ bills overnight will be welcomed.
Which? has set out how we want government to address issues in the energy sector in our Consumer Agenda for Government. With energy prices a top consumer worry, and speculation that a price cap could be introduced, we want the next government to have a clear position on energy market competition. Any direct intervention in the market, such as a cap on energy prices, must be tested and not result in an increase in bills overall, undermine improvements in customer service, or bring muchneeded innovation to a halt.
On top of all that, some get eyewatering demands – Which? heard from one energy customer hit with a £4,000 bill on top of a monthly £150 direct debit.
That consumer is not alone. At Which?, we’ve had many complaints about large, unexpected demands.
One in four, according to Which? research, has financial difficulties with signs of stress such as cutting back on daily spending or defaulting on essential bills. British Gas says the average customer on its standard tariff pays £1,044 a year or £87 a month.
When it gets much bigger than expected, it’s always a nasty shock, but for some, a financial disaster.
Citizen’s Advice has raised the issue of consumers receiving big surprise bills with energy regulator Ofgem.
In February, it estimated as many as 2.1 million homes may have received unexpectedly large bills covering a year’s usage during the previous 12 months. These demands over and above the monthly direct debit are known as “back-billing”.
These shock bills can arise when an actual meter reading shows you are using more energy than estimated when you set up the direct debit.
But there can be reasons where the supplier is at fault – not sending a bill, faulty meters, failing to read the meter, ignoring customer meter readings, getting properties mixed up, and even billing homes without gas for gas.
In 2007, energy companies agreed a voluntary code of practice not to chase back bills from over a year before if they were to blame. But some new suppliers have not signed up to the code. Ofgem now expects the code to become compulsory in winter 2017.
But you’ll probably still have to pay back bills if you’ve moved into a property and not told the energy supplier, or you’ve wilfully dodged payments or you’ve not allowed a meter reader into your home.