Britain's consumer energy market will be getting yet another mild shake-up in the ongoing effort to get people to switch their energy provider even though the number of people switching supplier rose by 15% year on year in 2015, according to figures from the energy regulator Ofgem. Last year, Ofgem referred the energy market to the competition watchdog, the Competition and Markets Authority (CMA), amid concerns that consumers were being overcharged.
The review, which has now been published, didn't recommend any drastic changes. The watchdog has called for a price cap for households with prepaid meters, which should reduce their bills by around £90 per household. It also reversed a recent change made by the regulator itself. In 2014, the energy regulator Ofgem told energy companies to reduce the number of tariffs on offer, as it just confused consumers. They were limited to four tariffs. But now, as This Is Money reports, "the CMA says these restrictions are damaging competition". The watchdog "wants comparison websites to be able to select from a larger range of tariffs".
But overall, the main recommendation from the CMA boils down to this if you're being overcharged for your energy (and it seems that many people probably are paying too much), then like it or not, you have to switch supplier. The CMA points out that a full 88% of households are still supplied by the "Big Six" providers (British Gas, Npower, SSE, Scottish Power, E.On, and EDF). If you are currently on a standard variable tariff with one of these providers (and 70% of people are apparently), you could easily save up to £400 a year on your energy bills by switching supplier.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
If you think it's too much hassle to be bothered messing about with comparison sites and trying to get an accurate gauge of your usage, you should prepare to be bombarded with junk mail. Part of the solution that the CMA has suggested is to create a database of customers who have been on a standard-rate tariff for three years or more. The data, which is controlled by the regulator, Ofgem, will be opened up to suppliers so that they can contact these people by post. There are 37 energy suppliers in the UK. Let's assume each of them send you only three letters. You will fairly quickly receive more than 100 in a row.
If that prospect has convinced you to switch, then a good way to start is by browsing comparison sites for a better energy deal. A list of approved sites can be found on Ofgem's web page (Ofgem.gov.uk). The general advice when switching is: stick with fixed options (this is a tariff that offers guaranteed standing charges and unit rates, usually until a defined end date). The majority of the best deals on the market remain the fixed ones, meaning cheaper energy and protection against price rises. You are locked in for a set period though, so watch out for exit fees, which can amount to around £60.
The text is now under consultation and the final report will be published in June. After that, the CMA can impose the plan. So if you are a standard-rate customer with a strong dose of apathy, you had better hurry up if you don't want to get a pile of letters landing on your welcome mat.
Budget highlights who's getting what
Economy: Economic growth forecast cut this year from 2.4% to 2%, and debt-to-GDP forecast revised up from 81.7% to 82.3% for 2016-2017.
Austerity: Government spending to be cut by £3.5bn by 2020.
Savers: If you're under 40, the government will give you £1 for every £4 you save in an Isa, up to £4,000 a year until age 50 the so-called "Lifetime Isa" (see the box on page 26 for more on this). The Isa limit will also rise to £20,000 from April 2017.
Drivers: Fuel duty frozen for the sixth year in a row, which equates to a £75 a year saving for the average driver.
Small businesses: From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. This means that 600,000 businesses will pay no rates.
Big businesses: Further measures were announced to crack
-
UK inflation slowed again in March – but a rate cut could be some months awayThe latest Consumer Price Index (CPI) data came in at 3.2% for March. This was slightly higher than some economists expected, but takes us closer to the Bank of England’s 2% inflation target.
-
Pension vs property: which option provides the best income for your retirement?News With the cost of a comfortable retirement on the rise, future retirees need to weigh up which strategy offers the best returns. But is a pension a better bet than property?
