Energy prices seem to going only one way: up
In order to help better protect consumers the Conservative party has proposed a price cap on utility bills. But will the proposed changes be good news for consumer rights or just another move in the favour of the Big Six?
Here at Computerquote, we want our customers to stay in the loop when it comes to their finances, so we’ve put together a quick overview of how these changes could affect your energy bills.
Energy prices are not complicated. Get lower rates and you will pay less. However, some are making them appear more complex for households as energy regulation has become a political football. Theresa May proposed an energy cap as part of the Tory manifesto for the last General Election and has further raised the topic at the Conservative Party Conference. The cap could force the market to offer a reduction to standard variable tariff which is the tariff people are defaulted on to if they have not switched recently.
The rate would be dictated by regulator Ofgem and updated every six months in order to allow for competition. It might target more vulnerable customers who are less likely to switch, which includes groups such as the elderly, disabled and the fuel poor. Its thought this could save consumers an average of £100 a year, although consumers who are locked in fixed-rate deals will likely not see savings. It remains the case that switching is the best way to save money on your energy bills.
Why is this significant?
Around 70% of consumers are paying more than they need to for their electricity as they are on a standard variable tariff. This is often the most expensive rate on the market, and has been made yet more expensive by the recent round of Big 6 supplier price rises. A fixed-rate deal, locking you into a set rate, can often be the best way to get hold of cheaper energy. Two-thirds of consumers – an estimated 17 million people – who did not sign up to a fixed-rate deal before the recent price increases, are thought to be paying as much as £200 more a year. Energy regulator Ofgem is researching the best ways to communicate with customers in order to get the best value possible.
The price cap means many people on the standard variable rate could end up with a better deal but still not the best deal. These are the least-engaged customers who, for whatever reason, whether it be no internet connection, lack of time, or perhaps not enough awareness, are not benefitting from the best available prices. By forcing a cap on prices to these consumers, energy companies will be significantly out of pocket. In order to offset this loss, energy companies are likely to raise their fixed-rate deals, penalising customers down the line.
How has the industry reacted?
With the threat of a price cap on energy bills, several of the key players in the energy market have raised their standard variable gas and electricity deals. Since the idea of a cap was proposed by Theresa May last year, we have seen increases of as much as 37%.
British Gas owner Centrica has warned that the price cap may have unintended consequences that give consumers a worse deal overall. The company has announced it believes that the cap may create less competition in the market and potentially even increase the average utility bill. The Tories have estimated that the price cap will reduce energy bills by as much as £100 a year for 18 million homes. A similar price cap in Spain led to a €24 billion deficit which the government were left to pick up.
How can you still get a good rate?
Whether energy prices are on the rise or not, it’s always worth shopping around to get the best prices. Fixed-rate deals are typically the best way to keep prices low. Waiting for the Government to impose a price cap would be a costly mistake when you could move to a fixed deal cheaper today.
Switch with Computerquote
It is with these thoughts in mind we have fixed it for Computerquote customers to team together to see if they can access a better deal than they might realize on their own. If you’re looking for a competitive energy deal, why not consider the collective switching sceme to help you get a good deal on your utility bills? Our collective energy switching scheme lets a group of potential customers band together in order to vye for better utility rates. Once you’ve signed up, then energy companies bid to supply energy to the group as a whole – which often leads to more competitive energy prices. With no obligation to take up the offer, it’s easy to sign up to see if you can get a more competitive rate on your bills.
With an uncertain year for energy prices on the horizon, make sure you know the facts so you’re in control of your utility bills for the future.