Households face less choice on cheap energy deals

The number of cheap energy deals for domestic consumers fell by 90 per cent in 2018 ahead of the introduction of a price cap from January, according to research by consumer group Which?

The organisation found that only eight deals for typical energy users costing less than £1,000 a year were available in December compared to 77 in January.

Which? said its analysis supported concerns that energy suppliers had reduced the number of low price deals to make up for the loss in income on their more expensive default tariffs after the cap comes into force next month.

“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,” said Alex Neill, managing director of home products and services at Which?.

“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,” she added.

The government said in October 2017 that it would introduce a price cap on default tariffs. Its level was flagged by the regulator Ofgem in September 2018 before being finalised last month — setting at £1,137 the ceiling on the amount companies can charge on default tariff deals from January. It is likely to be revised upwards from April.

Many smaller companies have employed so-called “bait-and-switch” models where customers were brought in on low price deals before being shifted on to higher price default tariffs at a later date. These models are likely to be hampered by the introduction of the cap.

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Two smaller companies that were recently forced to exit the market, Spark Energy and Extra Energy, cited the price cap as being among the reasons for their failures.

Rising wholesale energy costs this year had also put pressure on suppliers and contributed to an increase in tariff levels, with wholesale gas prices reaching a 10-year high in September.

A spokesperson for Ofgem said: “The energy price cap will stop customers on default tariffs, including some of the most vulnerable consumers, from being overcharged as much as £1bn by their energy suppliers from 1 January.”

“Our design of the price cap means it still pays to switch to cheaper fixed deals. While the price cap is in effect we are also working on a range of changes to the market that will help improve competition and potentially drive down prices for more consumers, including switching within one working day,” the spokesperson added.

Centrica, SSE and Scottish Power declined to comment on the report’s findings.



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