The energy price cap: What will it mean for you? | Personal Finance | FinanceHeat Profit
Last week was therefore an appropriate time for the Government to press ahead with its energy price cap legislation, designed to stop the big utility companies overcharging for gas and electricity.
The move follows growing public anger about energy company profiteering, as the “big six”, namely British Gas, EDF, E.ON, Npower, ScottishPower and SSE, regularly hit customers on their standard variable tariffs (SVTs) with inflation-busting price hikes.
While welcoming the proposed price cap, which could save households £100 a year, energy experts warned that it does not guarantee cheaper utility bills.
Prime Minister Theresa May announced the legislation last week, saying that it would “force energy companies to change their ways” and cut bills for millions of hard-pressed families.
Regulator Ofgem will be charged with implementing the cap, which should help 11 million households, many of whom sit on SVTs for years when there are cheaper deals available.
However, the cap will not become law until later this year at the earliest and will then run until 2020, with the option to extend it annually until 2023.
GoCompare Energy consumer advocate Georgie Frost said the move could backfire by reducing people’s will to switch to a better deal: “Many could be lulled into a false sense of security believing the cap will guarantee cheap energy bills or a good deal, but it will not.”
Frost said it stills pay to shop around today as you could save far more than any cap: “The best advice for anyone on an SVT or default tariff is to switch now as you could save hundreds of pounds, rather than wait to see what happens with the energy cap.”
Kevin Pratt, consumer affairs expert at MoneySuperMarket.com, said another danger is that energy firms will offset any cap on variable rates by making their cheap fixed rate tariffs more expensive instead: “That would penalise savvy consumers who already shop around for the best value tariffs, and they could end up paying more.”
New figures from Ofgem showed that 5.1 million electricity consumers and 4.1 million gas consumers switched supplier last year, the highest number for almost a decade.
Most moved away from the big six suppliers, whose Market share has now plunged to a record low, with more than one in five households getting their energy from small and medium-sized suppliers.
Pratt hailed these encouraging figures that he said made a mockery of claims that the energy Market is broken: “There are now more than 65 suppliers and all types of different tariffs to choose from, which means there is plenty of competition.”
Two separate surveys highlight the level of customer disillusion with the big six amid complaints of poor service and rip-off rates.
Last month’s customer satisfaction report from comparison service uSwitch.com showed “challenger” suppliers storming to the top of the rankings, with the big six all languishing at the bottom of the table.
Octopus Energy, Bulb and Utility Warehouse took the top three places, followed by OVO Energy, FirstUtility and Utilita. Octopus also appeared in the top three in the Which? 2018 energy satisfaction survey, along with Flow Energy and PFP Energy.
Claire Osborne, energy expert at uSwitch, said: “Customers are sending a strong message to the more established players that customers will look elsewhere if they don’t feel they are being treated properly.”
The longer you have been on your supplier’s standard tariff, the more money you are likely to save from switching. Estimates range from £250 to as much as £491. Do not be afraid to try lesser-known suppliers as small can be beautiful.