Energy companies reap rewards from price cap
Ofgem raised the price cap from April. The cap sets the maximum prices that can be charged for gas and electricity for customers who are on default tariffs. Ofgem has allowed suppliers to charge more because the oil price is rising, increasing their wholesale costs. These are around a third of a typical energy bill.
There are around 10 million consumers on standard variable tariffs unaware of the energy price cap hike, according to research from Comparethemarket.com – 66% of the total. Their average bill is set to increase by £117 per year. An additional 300,000 customers whose fixed term tariffs come to and end in April, May and June face increases of £247 if they are automatically rolled on to a standard variable or default tariff.
Peter Earl, head of energy at comparethemarket.com,said: “The energy price cap has had the curious impact of providing an official licence to energy companies to hike their prices. It has potentially boosted energy companies’ profits by millions as customers wake up to the reality of price cap-induced hikes for the first time. Those that were aware of the energy price cap were expecting it to protect them from disproportionate price rises, while the majority still remain unaware of the impact it is having on the price they pay for their energy.
“Jolt consumers into action”
“Hopefully the bill shock customers on standard and default tariffs receive this month will help jolt consumers into action and to shop around for a more competitively priced fixed rate tariff. Hundreds of thousands of people across the market already switched in March and April but we hope to see that figure continue rising in the coming months.”
The group’s most recent March Energy Snapshot, showed UK households are switching away from the Big Six. E.ON has led the pack for seven consecutive months, with a fifth of comparethemarket.com energy customers switching away from the provider throughout March. British Gas and EDF also saw customers leaving. Bulb moved up one spot to second in the most popular tariffs leader table from the previous month, in part due to its move to cut prices for customers on its default tariff.
Comparethemarket.com’s EnergyCheck gives regular alerts when a cheaper tariff becomes available as well as notifying when a fixed deal is about to expire.