The number of cheap energy deals has plummeted by 90 per
cent in a year ahead of the introduction of the energy price cap
- leaving just eight tariffs costing less than £1,000 a year, new
research from Which? reveals.
The consumer champion looked at how many deals priced at
£1,000 a year or less for a medium energy user were available at
the beginning of the year compared to now - and found there had
been a huge drop since January, when energy customers had 77
tariffs to choose from.
The analysis lends weight to concerns that energy suppliers
may reduce the number of cheapest deals on the market, to make up
for money they might lose on their more expensive default tariffs
after the cap comes into force on 1 January.
The cap - set at £1,137 per year for a medium domestic
dual-fuel customer paying by direct debit - will save households
£75 a year on average according to Ofgem, although it will only
apply to default tariffs (usually variable) rather than fixed
deals.
The price cap was introduced with the aim of tackling the
extent to which people were overpaying for energy - particularly
to the Big Six firms.
But Which? is concerned these trends could lead to some
consumers being deprived of a choice of good-value deals and, if
the savings from switching are lower in future, then consumers
may be less inclined to shop around.
Worryingly, Ofgem has predicted that the price cap could
cause a reduction of up to 50 per cent in the number of customers
switching, Which? has previously highlighted this as a risk.
Currently switching is still an effective way of saving money on
your energy bills.
Which? believes the energy cap can only be a temporary fix,
designed to rein in the worst excesses of the broken energy
market. It must be accompanied by a drive to engage consumers,
while suppliers must look for innovative ways to give their
customers a better deal and improve customer service.
Ofgem also needs to closely monitor and report on how the
cap affects cheaper deals on the market to ensure that customers
will still be incentivised to switch and save money.
Alex Neill, Which? Managing Director of Home Products and
Services, said:
“The price cap is supposed to help consumers, so it is a
real cause for concern that some of the best-value deals seem to
have disappeared from the market just as it is introduced.
“This demonstrates why the cap can only be a temporary fix
- what is now needed is real reform to promote competition,
innovation and improved customer service in the broken energy
market.
“If you are unhappy with your current energy provider, you
should look to switch now to save significant amounts of
money.”
Notes to editors
-
Prices are based on monthly snapshots (on 14th of each
month) of dual-fuel tariffs on sale in all regions in
England, Scotland and Wales, paid by fixed monthly direct
debit for a medium energy user (using Ofgem's averages of
12,000kWh gas and 3,100kWh electricity per year). The data is
from Energylinx, prices are averages across regions, rounded
to the nearest pound and correct on 14 December 2018.
-
Ofgem, Statutory consultation default tariff cap
overview document, p43: "We expect that under a cap,
switching levels would have been lower, by up to 50%".
-
Which? also conducted research with consumers to ask
about their awareness and likely bill impact of the energy
price cap, via an online survey conducted by Research Now SSI
of 4,054 people across the United Kingdom. Data were weighted
to be representative of the UK population, with questions on
the energy price cap only being asked to respondents in Great
Britain. This found that more people were unaware of the
energy price cap (48%) than were aware of it (45%) and, for
those consumers who had never switched supplier - hence more
likely to be disengaged and supposed to benefit most from the
introduction of the price cap - the proportion who thought
their bills would decrease was only 13%. Further detail on
the research is available at: https://consumerinsight.which.co.uk/articles/energy-price-cap-attitudes.
