Government plans for a cap on energy tariffs announced this week have added confusion to a fast-changing market but reinforce why switching provider is the best option in reducing bills.
The Domestic Gas and Electricity Bill, introduced on Monday (February 26th) is designed to curtail the unacceptably high rates on Standard Variable Tariffs (SVTs) and the hope is that the proposed price cap will help the 11 million customers currently on these rates save up to £100 a year.
Its focus on steep energy charges coincided with the news that energy bills were set to leap again by up to 9% this year as wholesale gas and electricity prices continued to rise.
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The Bill would allow the energy regulator, Ofgem, to limit the amount companies are allowed to charge customers on SVTs. When passed, the new law will enforce the cap for the next two years with the potential to extend this year by year up to 2023.
However, the new legislation has had a very mixed reception, with the regulatory policy committee harshly criticising the measures while consumer group Citizens Advice applauded the protection it would offer.
And the general mood among different stakeholders and groups is that people will benefit far more by switching supplier, saving potentially hundreds of pounds a year.
The main arguments against the Bill are that it might cause market distortions, with knock-on effects for competition, services and sector jobs. The regulatory committee watchdog was also quite scathing that even outline costs scheme had not been given.
The STVs have long been in the Government’s sights and have been described by Prime Minister Theresa May as a “rip-off”.
But the idea of a price cap is not seen by many as the solution to high energy bills. Indeed, the Competition and Markets Authority (CMA) strongly backed the better option of switching supplier two years back at the conclusion of an 18-month investigation into the energy market.
The CMA advised then against a full energy price cap, limiting this to the 4 million people on pre-payment meters. The watchdog advised then that customers with the Big Six energy companies were being overcharged by £1.4bn a year on SVTs.
But there are concerns around switching to a different energy company, particularly as the more competitive market evolves with new small suppliers. In just a year, 18 new energy companies have started offering services, bringing the total to 66.
This rapid expansion was a highlight of a Mail on Sunday article that raised fears around small providers going bust and what would happen to consumers’ energy supply. But it also strongly advised people to consider switching to save money.
Business and domestic customers can take heart that they will not be left without a supply of electricity or gas should the very worst happen and their supplier ceases trading. Ofgem will step in to provide a supplier.
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SaveMoneyCutCarbon can ensure that you are on the very best tariff for your utility supply contract and our service means material savings can often be delivered at no cost to you. At the very least, it is good to check that your existing supplier is providing the best prices in the ever-changing utility market. As part of this mission, we have partnered with Fidelity Energy who provide a market-leading platform for us to access best tariffs on energy and gas supply.
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