Fix your energy bills before price cap applies

THE Government’s energy price cap – designed to end expensive, variable-rate tariffs – is likely to result in higher prices for many households, energy experts say.

The new cap, the details of which are due to be published later this week, are supposed to limit the cost of the most expensive tariffs, typically paid by those who have not switched supplier for several years.

But most analysts say the cap risks driving smaller, more competitive firms out of business, limiting competition. And if – as expected – the cap works by limiting the standard tariff in relation to the best prices being offered, analysts say it is likely those best prices will rise. The effect will be to narrow the gap between the best and worst tariffs.

There is a precedent. In May this newspaper reported how prices had deteriorated following Theresa May’s initial price cap announcement.

She first suggested in October the Government was prepared to take action against firms who were “failing” their customers. Between then and May, the average cost of the biggest six firm’s cheapest tariffs rose by almost 20pc. In comparison standard tariffs went up 7.2pc.

At the moment the average standard dual fuel tariff from a big six supplier costs £1,131 a year. The cheapest one-year deal, from Iresa Energy, costs £820, based on average annual usage for gas and electricity combined. This is a difference of £311.

Mark Todd, co-founder of price comparison service energyhelpline, suggested that the new price cap would put pressure on the finances of niche suppliers. He said such cheap deals could start to disappear, giving larger suppliers a “stronger grip on the market”.

Richard Neudegg, head of regulation at uswitch, another comparison service, said “heavyhanded regulation” at this stage could “undermine the progress” made in encouraging customers to switch suppliers.

He said: “A price cap won’t put an end to standard tariffs, or the fact that they are generally the worst-value deals.

“It will lull energy customers into a false sense of security. This takes the pressure off energy companies to compete.”