Gas and electricity Updated:
Energy costs can eat up a hefty chunk of people's incomes, and with prices only ever seeming to be on the rise, it's an ongoing concern for many. It doesn't help when people become loyal to a provider and don't bother switching, and this is why Ofgem, the energy market regulator, has stepped in.
Competition has been lacking in the market for some time, and a recent study by the Competition and Markets Authority (CMA) has confirmed the extent of the issue. The two-year investigation found that two-thirds of households are disengaged and paying over the odds for their energy as a result, compared with those who have switched their tariff and found a better deal.
The CMA recommended several remedies in response, and Ofgem has now outlined its approach to taking those remedies forward. The measures are designed to boost competition and innovation in the market, with the ultimate aim to drive down bills, improve service and "deliver a more competitive and fairer energy market for all consumers".
One of the biggest changes will benefit those on pre-payment meters, who were found to be among the most vulnerable and also the least likely to switch. From next April, these customers will be protected by an interim price cap, which should save them an average of £75 per year.
Other disengaged customers will also be targeted, namely those who remain on expensive standard variable rate tariffs. Ofgem will work closely with suppliers to help those customers shop around and save money, such as by trialling more effective prompts on bills to encourage them to compare tariffs. A database service will also be piloted next year, which will allow suppliers to offer disengaged customers better value deals.
This is all just for starters: the regulator is also consulting on various other measures to help give consumers a wider choice of good value deals, and combined with other changes already happening – such as smart meters, its Be An Energy Shopper marketing campaign and faster switching – these remedies "provide an opportunity to transform the energy market", says Ofgem.
Ofgem's annual review of the market has found that the majority of consumers who don't engage are losing out, with it being possible to save around £300 a year by shopping around. A growing number of households could be benefiting, with the proportion of people on pricey standard variable tariffs having dropped from 69% in March 2015 to 66% this year, but although this suggests that switching is increasing, there's still a lot of work to be done.
So why wait? Switching suppliers could save you a small fortune, and it needn't take long to get the ball rolling. Start by comparing tariffs using our energy search tool and see how much you could save.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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