Summer 2018 switchers ‘face price hike’ as deals come to an end

Research from Uswitch.com has shown that millions of energy customers who switched to fixed deals in the wake of price increases last summer could face a £426 million price hike over the next three months.

As a result, industry trade body Energy UK has advised customers to shop around for a better deal.

The research claims that bills for 1.6 million households will increase if they do not switch, as 276 fixed price energy deals come to an end between July and September.

Uswitch said the average increase will be £269 per household as they are automatically rolled onto default standard variable tariffs (SVTs).

The price comparison service pointed out how 13 price rises in the space of three months last summer added an average of £71 onto the bills of over 9 million customers – prompting 1.5 million to switch between July and September.

Following the introduction of Ofgem’s revised price cap, which was increased by £117 to £1,254, Uswitch says 44 energy companies have already increased the cost of their SVTs by up to 17 per cent.

Next month industry regulator Ofgem is expected to announce the price cap will decrease by around £80 on 1 October.

The cap is calculated months in advance meaning current prices are based on the costs of buying energy between August last year and January this year.

Yet falling wholesale costs this year perhaps best explains the increased gap between the cheapest deals on the market and SVT cap.

Currently there are more cheaper energy deals than at the start of the year, with 50 deals below £1,000, compared to 11 at the start of 2018.

With shorter-term hedging strategies smaller suppliers tend to respond more quickly to changes in wholesale prices, meaning they tend to offer cheaper deals.

Generally, suppliers buy a significant proportion of energy in advance in order to hedge against costs and other uncertainties and customer churn makes it difficult to get this right.

In response to the figures a spokesperson for Energy UK said: “We have a price cap in place for default tariffs set at a rate the independent regulator calculates is a fair price for supplying energy.

“Fixed deals are generally been cheaper than SVTs due to the certainty of having a customer for fixed period which can allow suppliers to offer them the most competitive deals, particularly if wholesale prices are low.

“We would always advise people to check with their existing supplier or shop around to see if they are on the best deal for them – as over half a million people do and switch each month.”

Meanwhile Rik Smith, energy expert at Uswitch.com, said: “Energy bills might not be front of mind just as everyone is about to head off on their summer holidays. But over one and a half million households could be in for a nasty shock when they get home if they don’t act now.

“There was more than one price rise a week during 2018, and many of those who switched to escape the onslaught then are now seeing their fixed price plans coming to an end. It’s time to take action to avoid being rolled onto an expensive standard tariff.

“Although the price cap is set to reduce the maximum cost of standard tariffs in the next few months, customers on default plans could still be paying up to £300 more each year compared to those who shop around. That’s enough to get to Miami and back this summer – which is far more exciting than handing the money over to an energy company.”