UK households are overpaying by more than £2bn on their energy bills despite the price cap reduction

Almost 10 million households across the UK have lost more than £2.2billion in savings on their energy bills this year alone, new research has revealed.

Customers stuck on standard variable tariffs with Big Six suppliers will pay on average £220 more over the course of the year than they would if they had switched to a cheaper deal, according to energy provider Bulb.

Although the energy price cap has recently been lowered by £75 to bring the level to £1,179 a year for customers on default tariffs in an effort to prevent large bill increases, the Big Six are still being accused of using the cap as a target rather than a limit.

Eon, EDF, SSE and Npower have all set their SVTs at the cap limit, £1,179, as of October whilst Scottish Power and British Gas have set their prices just marginally below at £1,178 and £1,177, respectively.

Costly: The Big Six are all keeping their prices at the top level of the energy price cap

Costly: The Big Six are all keeping their prices at the top level of the energy price cap

To calculate how much more SVT customers are paying, Bulb analysed what consumers would have paid in the different time periods (January to March, April to September and October to December) for each of the Big Six’s standard variable tariffs. 

The figures assume Ofgem’s typical use of 3,100 kWh a year for electricity and 12,000 kWh a year for gas.

It compared this to the average cheapest deal available at the time using Ofgem’s average of the 10 cheapest tariffs available, published in their Retail price comparison by company and tariff type report. The figure it used is the cheapest average tariff on 28 December 2018, three days before the price cap came in.

READ  Mike Ashley’s Sports Direct warehouse is tipped to be sold to a Malaysian fund for £120m

This difference was then weighted by the length of time each cap was/will be in place. This then provided a total overspend figure compared to what they would have paid had they switched to the December 2018 tariff. 

January prices April prices October prices
Eon £1,133 £1,254 £1,179
British Gas £1,131 £1,254 £1,177
SSE £1,133 £1,253 £1,179
Npower £1,133 £1,254 £1,179
Scottish Power £1,133 £1,254 £1,178
EDF Energy £1,132 £1,254 £1,179
Average £1,133 £1,254 £1,179
Source: Bulb       

Hayden Wood, co-founder and CEO of Bulb said: ‘We’ve always supported the price cap – it’s helped families who have been overcharged on their energy for years. But it’s clear the Big Six treat the cap as a target and not a limit, consistently setting their standard tariffs at the maximum level allowed.

‘It’s disappointing to see families continue to get a poor deal on their energy as a result of this practice.’

The price cap was introduced by the government last year in a bid to encourage those on SVTs to switch supplier and put a stop to the loyalty penalty – customers who get penalised for staying with the same provider. 

It was initially set at £1,137 when it launched in January 2019 but increased to £1,254 thanks to rising wholesale costs in April before it was announced this month that it will be reduced to £1,179 as of October 1.  

Research from Bulb has shown that nearly 10 million households are still on the default tariffs with British Gas claiming the largest number of SVT customers at over 2.7 million. 

READ  Revolution Bars puts new openings on ice and vows to improve existing sites after sales stumble

SSE followed with just over 2 million customers and Eon followed with 1.9 million. 

Supplier Number of SVT customers
British Gas 2,723,590
SSE 2,039,540
Eon 1,900,821
EDF 1,240,239
Npower 991,889
Scottish Power 1,017,584
Total 9,913,663
Source: Bulb   

This is despite customers being encouraged to switch from default tariffs to fixed tariffs, especially for the winter period where households are likely to use much more energy than normal.

This year, the added uncertainty of Brexit is another reason for households to consider switching to fixed tariffs so they can be certain that their bills will not increase wildly after the UK has left the EU.

Cordelia Samson, energy expert at uSwitch said: ‘Don’t be fooled by the news that energy suppliers have announced a price cut. They’ve done this because Ofgem, the energy regulator, has lowered the maximum amount an energy company is allowed to charge on its so-called Standard Variable tariff.

‘But these deals are pretty much the worst value on offer, no matter what level Ofgem sets the price cap. Instead of waiting for the price cap to be reduced, you could save hundreds of pounds in just a few minutes by switching away from your supplier’s standard plan. 

‘For extra peace of mind, if you choose a fixed deal, you’ll lock in the price you pay for 12 months or more, giving you peace of mind throughout the winter months.’

This is Money, with the help of uSwitch, has put together a list of the best tariffs available on the market at the moment. 

READ  Stamp duty take falls by £1bn in a year but home sales steady

All of the best buys are offered up by smaller suppliers with no Big Six tariffs making the cut.  

The cheapest deal available at the moment is an SVT plan with Outfox the Market on their One Variable 6.0 tariff costing on average £846 per year. 

The supplier also offers the cheapest fixed deal on their FIX’D 19 2.0 tariff which averages £881 a year. 

To find the best deal for them, households are encouraged to use price comparison sites to see if they could switch to a better tariff.  

Supplier Plan name Tariff type Green? Exit fee (£) Average price (£)
Outfox the Market One Variable 6.0 variable Y 846
Green Oak variable Y 867
Outfox the Market FIX’D 19 2.0  fixed  881 
Avro Energy Simple and SuperSave  fixed  891 
Nabuh Energy Zara Tariff (12 Month Fixed)  fixed  900 
Breeze Energy Breeze Fixed Sunshine Saver 2019 v3  fixed  40  920 
Igloo Energy IGLOO PIONEER variable N 932
Green Network Energy GNE Summer Saver V4  fixed  50  932 
Pure Planet 100% Green variable Y 962
People’s Energy The People’s Tariff variable Y 994
Source: uSwitch (all prices correct as of correct as at 9 September 2019. All fixed tariffs are fixed for 12 months 




Please enter your comment!
Please enter your name here