Energy price rise have become the talk of the town! Apart from most of the Big Six suppliers, the relatively smaller suppliers have also upped their household energy prices making things worse for the consumers. Even the government has admitted that millions of consumers are overpaying for their electricity and gas usage. The authorities support the fact that now is the time to take drastic measures to protect the energy consumers and UK households.
The Department for Business, Energy and Industrial Strategy said that ministers and law makers are ready to take concrete action to mend the loop holes found in the energy market. It stated that the ministers were “concerned by recent price rises, which will hit millions of people [who are] already paying more than they need to. Wherever markets are not working for consumers, this government is prepared to act.”
Apart from the five Big Six suppliers who have already announced enormous price rise, there are smaller and medium sized suppliers who have also been on a price rise spree. Some of them include Good Energy which announced an increase of 11%, First Utility which hiked its energy prices by 9.7%, Utilita which upped the prices by 2.9%, Co-operative energy which hiked it by 5% and Ovo Energy that made a jump of 1.5%.
Experts suggest that the Big Six are the main culprits as they occupy 85% of the energy market. As they have 85% of the customers with them, they can actually control the market by either increasing or decreasing the energy prices. They can turn the tide if they actually want to as two-third of their customers are on SVTs and do not show any switching patterns. Moreover, the remark by Ofgem that these companies have no reason to increase prices as they buy energy two years before the actual supply makes it very clear that rise in wholesale energy prices has no impact on the Big Six.
Despite this, they are on a spree of price hikes making it mandatory for the government to step in and address the issue. The MPs are also hinting to the fact that energy companies are ripping off their loyal customers who are too busy to switch to cheaper tariffs. The customers are being moved to the most expensive tariff without informing them that their contract for the cheaper deal has expired and they can compare energy tariffs and their prices to keep their energy bills under control.
Former Tory minister John Penrose expressed his disappointment by saying that “Loyal customers are being systematically ripped off by big energy firms, and it’s just not fair. Most industries don’t exploit their best customers like this, by quietly switching them on to expensive default tariffs when their existing deal comes to an end. Loyalty should be rewarded, not exploited.” He is also expected to propose the ‘relative price cap’ method in which the consumer cannot be transferred to a deal that more than 6% expensive when compared to their previous tariff.
A recent report by the CMA, suggests that the customers have paid £1.4bn a year extra between 2012 and 2015. Out of the total, 70% of the consumers paid at least 11% more on electricity and 15% extra on their gas prices. This clearly suggests that consumers that do not switch to a better deal are not only wasting their money but are also creating an imbalance in the energy market.
For this, a debate is expected in parliament where ministers would give their suggestions to find a common alternative that works not only on the Big Six but for all energy suppliers across the UK. As the method of pushing the busy customers to switching the supplier is not working till now, the government is expected to find a solution to keep the energy suppliers under control. This is on their priority list and we can expect a quick announcement in the month of April.
To sum up, there is a common thought that energy companies are exploiting their loyal customers. To combat this, the authorities and the government are putting their foot down to take concrete measures to keep the suppliers under control. If this happens then we can expect fair energy prices and tariffs for the UK customers. This would be a positive sign for households who already face the aftermaths of Brexit. Let us wait and watch the government’s plans and solutions for regulating energy suppliers as well as their innovative ideas to bring down the overspending on energy.
Brijesh is a financial advisor at Freepricecompare.com and a passionate blogger. He writes on personal finance and money-saving tips. He suggests all UK households to compare home energy prices before renewal energy contract with existing supplier. When he isn’t writing, he is spending time to find advance technique of farming and its way of applying. He also plays his guitar gifted by his father.