EU vote adds to energy price pressure
By Simon Bain
THE cost of household energy is on the way up again, as providers withdraw their best deals and launch new tariffs in response to rising wholesale energy prices and the uncertainty surrounding Brexit. But a record 360,000 people switched supplier in June, almost 60 per cent up on the same month two years ago. Are you a serial switcher yet? Over 2.3 million customers have switched in the first half of the year, a 50 per cent rise on the first half of 2014.
One in three of all switches were made to the smaller and mid-sized suppliers, whose numbers have rocketed in the past three years.
Lawrence Slade, chief executive of Energy UK, said: “It is great to see more and more customers shopping around over the summer months before winter hits. Since June 2014, the cheapest tariffs have fallen by over £200. There are now around 50 deals under £900 on offer. The new Energy Switch Guarantee – launched by the Industry last month – has made it even easier for customers to switch.”
The wholesale prices which govern the market have been dropping since 2013, sparking a highly competitive price war. The number of new small suppliers gatecrashing the market to challenge the “big six” has soared from 24 to 44 in that time.
That has helped drive the “best buy” 12-month dual fuel fixed tariffs for middling household consumption from £1,000 down to below £750.
But that seems set to change as providers start announcing more expensive deals, suggesting it pays to be a serial switcher.
Ben Wilson, energy spokesperson at Gocompare.com, says: “As the summer sets in it can be easy to forget about your energy bills.
“However, it’s important to keep on top of when your fixed deal ends or risk being put on a standard tariff.
“The energy market has changed significantly following the arrival of smaller suppliers which have dominated the best buy tables for quite some time now. While it’s tempting to stick to a company with a more established name, these new suppliers are out to lure customers away from the big six and are offering significant savings as an incentive to switch.”
Anyone who may have forgotten they had a fixed dual fuel energy tariff expiring at the end of last month should review their bills. Of the 16 fixed deals which expired on June 30, nine will result in homes paying more for their energy if they allow themselves to be automatically rolled onto their supplier’s standard variable tariff (SVT).
Scottish Power, British Gas, Sainsbury’s Energy, EDF Energy, Npower and Ovo Energy are among those with recently expired tariffs, resulting in an average annual price rise of £97.92, says Gocompare.com.
ON British Gas’s new FreeTime tariff, which will offer free electricity for eight hours at weekends for its two million customers who have smart meters installed, Wilson says: “For British Gas customers with smart meters who use a lot of electricity at weekends, the new FreeTime plan could offer a welcome reduction in their energy bills.
“However, be sure to check the daily charges and unit charges, as there’s little point having free electricity for eight hours a week if it will cost more than other tariffs available to you when you do pay for the electricity you use.”
The website quotes £207 as the average saving for its customers. But the Competition and Markets Authority, in a much-criticised report published on the day after the EU referendum, estimated that dual fuel customers of the big six on standard tariffs “could have made average annual savings of around £330 in mid2015 if they had switched to another supplier”.
The report, derided for its failure to propose any effective counterweight to the power of the big six, said: “In our survey of 7,000 domestic customers, 34 per cent of respondents said they had never considered switching supplier and 56 per cent said they had never switched supplier and did not know if it was possible or did not know if they had done so.”
It said 70 per cent of customers of the big six were on the standard variable tariff “despite the fact SVTs are more expensive than alternative tariffs”. The report also rejected the arguments of some of the big firms that people chose the SVT for its added benefits.
“We have not identified any characteristics of the SVT to which customers would attach significant value, particularly in comparison with cheaper fixed rate tariffs with no exit fees,” it said. “Nor have we seen any evidence to suggest that suppliers offering the cheapest tariffs have worse quality of service than those offering more expensive tariffs. Further, our survey results suggest that those who are on low incomes are far less likely to have engaged than those on high incomes, which undermines the argument that most customers do not take up available savings because they are not significant enough.”
The CMA says big suppliers made “excess profits” totalling £2 billion between 2012 and 2014 through the market not working properly.