Cheapest energy deal £400 less than standard rate: switch now
The wholesale gas price has been coming down in the last few weeks and the savings are finally starting to filter through to household energy bills.
The average price of the top 20 energy market tariffs at the end of February was £831.80. By the end of March, the average price had fallen by £7.40 (0.9%) to £824.40.
Since the beginning of this month, the average price of the top 20 tariffs has dropped to £799.20, a further price reduction since of £25.20 (3.06%), according to data from comparethemarket.com.
Cheaper fixed tariffs tend to follow the changes in wholesale prices more closely while suppliers’ default standard variable tariffs (SVTs) tend to stay fixed, according to uSwitch.
However, its data suggests that the gap between the most expensive tariff on the market and the cheapest has been widening with the difference currently around £411 – one of the biggest gaps ever reported between the cheapest deal and default price cap.
The biggest gap recorded was between July and September 2019 when it was £434.68.
Will Owen, energy expert at uSwitch, said: “That’s a huge potential saving for any household.
“The cheapest fixed tariffs are getting cheaper still, with suppliers still driving down prices to attract new customers.”
The cheapest fixed deal is from Outfox the Market at £750 a year for an average bill size (medium annual consumption on a dual fuel tariff, paying by monthly direct debit).
In comparison, 11 million households on their energy supplier’s pricey default tariff are paying around £1,162. This is the energy price cap set by the regulator Ofgem.
For the four million households on pre-payment meters, the cap stands at £1,200, meaning an even greater saving if billpayers can switch to the cheapest deal available.
Emergency measures to help those impacted by coronavirus
Given the current coronavirus pandemic which is causing widespread financial uncertainty, energy suppliers have brought in emergency measures to help customers. These include reviewing bill payment plans, payment breaks or payment reductions, giving customers more time to pay and access to hardship funds if required.
Other measures include the continued supply of energy for those who fall into debt, while those on a pre-payment meter unable to go to the shops to top-up may be able to receive funds to the account or may be sent pre-loaded top-up cards by post.
Owen added there’s no indication that Ofgem is planning to reduce the price cap in response to the current situation as the long-term effects of COVID-19 are still unclear.
“The methodology for setting the cap rate looks at prices over the past six months, so if the wholesale price drop is taken into account it would be incorporated in the calculation of the next price cap in August, not the current one,” he said. The next price cap will come into effect in October.
Can you switch to a cheaper deal?
The message is not to wait until the energy price cap potentially falls further but to switch to the best deal now.
Comparethemarket.com said there have been no updates from the regulator in relation to relaxing the switching with debt rules.
Peter Earl, head of energy, explained: “The same rules still apply: if you’ve been in debt to your supplier for less than 28 days you can still switch; your old energy supplier will add what you owe to your final bill.
“However, if you have debts more than 28 days old, you’ll need to pay this off to your old supplier before you can switch.
“If you’re on a pre-payment meter and you owe £500 or less, you can ask for your outstanding balance to be transferred to your new energy supplier.”
See Yourmoney.com’s guide to switching energy for more information.
Small supplier in focus
Igloo Energy has 90,000 customers and offers just the one tariff – Igloo Pioneer – a standard variable tariff.
While typical suppliers have yet to reduce the cost of their SVTs below the energy price cap, Igloo has announced it will cut prices by up to 30% off the back of falling wholesale gas prices.
The reduction will take effect from 15 April and means customers will save over £320 a year compared to the larger energy companies’ default tariffs. This is its fourth price cut.
Wholesale electricity costs have also fallen but Igloo said it hasn’t been able to reduce electricity bills as there is an increase in distribution costs and because of the impact of renewable schemes.
CEO of Igloo Energy, Matt Clemow, said: “At this incredibly challenging time for all UK households, we’re proud to be lowering our customers’ bills again. The impact of COVID-19 has been significant reducing global natural gas prices dramatically, and is changing the way customers use energy at home, so we’re taking action early to pass on these significant savings as any good supplier should.”