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Standard energy tariffs are “fundamentally unfair”

Standard energy tariffs are “fundamentally unfair”

Category: Gas and electricity

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

We all know how expensive energy bills can be, particularly at this time of year when we're all turning the thermostat up a notch or two. But what if you're paying even more than you should be? If you're on your provider's standard tariff, that's a very real possibility.

Standard tariffs invariably cost more than their fixed counterparts, with the latter meaning that your energy rates stay at the same fixed price for the duration of the contract. It's normally a short-term deal, with fixed tariffs typically lasting for a year or two – but it's what you do once your contract comes to an end that will make all the difference.

If you switch to a new supplier with another low-cost fixed rate tariff, there's nothing to worry about – but if you revert to your lender's standard (normally variable rate) tariff, your bills could jump up, in some cases significantly. Energy firms tend to charge much higher prices for these standard tariffs, something that Citizens Advice says is "fundamentally unfair".

The comments follow evidence which claims that gas and electricity firms make as much as a 24% profit from standard variable rate tariffs – why should you be paying that kind of price premium for nothing? Happily, it's something that Greg Clark, the Secretary of State for Business and Energy, says he'll investigate, and this can't come soon enough.

"The Secretary of State is right to look into energy firms that add to their profits by squeezing more out of loyal customers," said Gillian Guy, chief executive of Citizens Advice. "Only 12% of customers on the lowest incomes are on the cheapest deals, compared with 70% of the highest earners. It's fundamentally unfair that energy suppliers are charging much higher prices to people who are on the standard tariff – and often have been for years – than those on fixed deals."

Gillian says that one way to help those needlessly paying too much would be to make energy firms switch people to a cheaper deal automatically if they have been on the standard tariff for a number of years, and while this would certainly be beneficial to huge numbers of households, there's no telling if this will actually come to fruition. In the meantime, it's all about being proactive.

If you're on your provider's standard tariff, or if you're about to come to the end of a fixed contract, now's the time to compare the options and see if you can find a cheaper deal. Use our energy comparison tool to get started, and stop paying your provider more than you need to!

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.