Households lose out as fixed energy tariffs far exceed cap

Christopher Hope
·3 min read
energy bills
energy bills

Homeowners are paying hundreds of pounds more for their energy bills because they are locked into fixed tariffs which far exceed a Government-imposed price cap.

The Government will in the coming weeks set out plans to force energy companies to switch customers on to lower tariffs, protecting millions from paying over the odds.

But new research published by the auto-switching service Look After My Bills found 65 tariffs with 22 different suppliers are currently offering fixed price deals that are more expensive than the current price.

The cheapest deals on the market currently cost under £950 which means people on these fixed price deals will be paying as much as £250 more per year.

Of the Big Six energy companies, ScottishPower has the most fixed price deals above the current price cap, with 18 tariffs above the cap.

Ofgem, the industry regulator, earlier this month announced that energy prices for millions of households will increase from April after it increased the price cap by £96 for default tariff customers.

An Ofgem spokesman said: “The price cap protects around 11 million households on default tariffs, and around 4 million households who use prepayment meters.

"Fixed tariffs are generally much cheaper than default tariffs and priced below the level of the cap, which will increase on April 1 mainly due to higher wholesale energy prices.

"The impact of an increase in wholesale prices usually feeds more quickly into the price of fixed tariffs, which is why some are already increasing.”

On automatic switching, the spokesman added: “We will continue working closely with the Government to determine the best way to take the Government’s proposals for automatic switching and will consider carefully what would be the best way to implement these measures.”

The “Big Six” energy companies have all said that they are putting their prices following the increase to the cap, affecting millions of customers.

Of those, Eon, Npower and British Gas have said they will put up prices by the maximum allowed by the new cap, with SSE and EDF increasing prices to just £1 below it.

Look After My Bills urged ministers to close a loophole which allows energy companies to offer fixed price deals at prices above the price cap, potentially locking in unwitting customers to sky-high bills.

This is because the price cap only applies to variable rates, not fixed price deals. According to the research, 15 of the high-priced fixed deals will still be above the new price cap when it comes into force in April. It will increase by £96 to £1,138 a year.

Simona Rutkauskaite, Research Analyst at Look After My Bills, said: “The price cap was put in place to protect hard-pressed families across the country but energy companies continue to find ways to charge households over-the-odds for their household bills.

“Families up and down the country are already facing financial struggles due to Covid-19 and with the price cap set to rise in April, energy bills will rise for millions across the UK.

"The Government needs to step in and close the loophole allowing these energy companies to offer fixed price deals that are above the price cap."

A Business department source said ministers will be consulting on opt-in/opt-out switching "shortly". They added: "It is not true that customers are 'locked' into their energy deals, as they are free to choose to end their contract or switch to a different tariff."

A department spokesman said: "We always encourage households to shop around for the cheapest tariffs, but the price cap provides protection for those who don’t.

“We have extended the energy price cap until the end of 2021, ensuring 15 million British households are still protected from being overcharged.

"Our plans to crack down on rip off deals for long standing customers will also help drive down costs for consumers."