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
Customers looking for cheaper energy deals can compare deals with Which? Switch, a transparent and impartial way to compare energy tariffs and find the best gas and electricity supplier.
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.
Earlier this year, Which? research revealed the energy price cap won’t cut bills for customers on three in ten dual-fuel deals, some of which cost almost £200 more than the cap per year for a medium energy user: https://press.which.co.uk/
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