Price cap? Don’t rely on it

The Daily Telegraph - Your Money - - OPINION - Sam Mead­ows

More than half of en­ergy deals on the mar­ket are cheaper than the price cap newly in­tro­duced by the Govern­ment. Of the 279 fixed-rate en­ergy deals cur­rently be­ing of­fered, 60pc would work out cheaper than the new limit on prices, ac­cord­ing to switch­ing web­site Com­parethe­mar­ket.com.

In­tro­duced on Tues­day, the rule lim­its bills at £1,137 a year for a house­hold with aver­age con­sump­tion – but the ma­jor­ity of con­sumers would still be bet­ter off switch­ing supplier.

The cheap­est deal on the mar­ket is Util­ity Point’s Up En­ergy Saver tar­iff at £903 a year, £234 cheaper than the cap. The aver­age con­sumer who switches supplier pays £921 a year.

Peter Earl, from the web­site, said: “This is a re­minder that the price cap will not solve the un­der­ly­ing is­sue – mil­lions of peo­ple stuck on stan­dard and de­fault tar­iffs will still be over­pay­ing for their en­ergy.”

The cap ap­plies to the de­fault tar­iffs paid by cus­tomers when any fixed- rate deals end. These tar­iffs are no­to­ri­ously bad value for money and the Govern­ment es­ti­mates its cap will help 11 mil­lion house­holds that are loyal to their supplier.

But there is con­cern that the cap could lull con­sumers into a false sense of se­cu­rity and re­duce the num­ber who switch. En­ergy reg­u­la­tor Ofgem’s im­pact as­sess­ments sug­gest the num­ber of peo­ple who move sup­pli­ers could re­duce by a third.

The cap is a tem­po­rary mea­sure while fur­ther work is done to make the en­ergy in­dus­try fairer. It will be in place un­til at least the end of 2020 and can be in­creased ev­ery six months, but only in line with ac­tual cost in­creases for sup­pli­ers.

Launch­ing the cap, Claire Perry, the en­ergy min­is­ter, said: “Switch­ing is still the best way to find a bet­ter deal, but that doesn’t mean cus­tomers should be pun­ished for their loy­alty.”

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