Martin Lewis explains how to reduce your energy bills
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Energy suppliers in the UK are looking to attach their customers to fixed deals, some of which costs £4,000 a year, as the sector continues to struggle amidst the ongoing crisis.
Market pressures resulting from the pandemic and sector-specific issues have seen various energy suppliers, including Orbit Energy and Entice Energy
Government ministers are facing ongoing concerns about the “untenable” rise to the energy price cap, which are proposed to take place in spring 2022.
Created to protect consumers and updated every six months, the energy price cap limits the rates a supplier can charge for their default tariffs.
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According to data compiled by uSwitch, a 12-month fixed deal for an average household currently costs an average of almost £2,500.
This figure is around £500 more per year than the amount Ofgem, the country’s energy regulator, which plans to increase the cap on variable tariffs to £2,000 in April.
Ovo Energy is currently offering a fixed-rate deal worth just under £4,200 to its customers, a large amount from the UK’s second largest energy supplier.
According to Martin Young, an energy analyst at Investec, energy bills could go up even further if households choose to stay on variable tariffs, which are protected by the cap, to avoid pricey fixed deals.
Speaking to The Telegraph, Mr Young said: “Between the end of November through to the last week, fixed price deals have jumped up.”
“If you now get to a situation where even well-hedged suppliers are facing these kinds of problems then clearly the price cap itself has structural problems.”
In a bid to boost financial performance in the sector, Ofgem is set to attempt stress testing on energy suppliers after the recent wave of bankruptcies.
However, Richard Neudegg, the Head of Regulation at Uswitch.com, believes this is too little, too late and more needs to be done to assist consumers and address the price cap.
Mr Neudegg explained: “Introducing financial stress testing after 26 energy providers have exited the market feels like the very definition of shutting the stable door after the horses have bolted.
“Financial testing should have been used to identify the suppliers that were ill-equipped to handle the shocks that have rocked the market. While necessary for the future, these proposals are clearly too late to help the current crisis.
“Ofgem’s priority must now be to build a resilient market that can stand strong in the face of any future shocks.
“The way the price cap works has also been a major factor in the current energy crisis.
“It is currently delaying the pass-through of the full shock to the system for consumers, but the regulator cannot prevent this coming in April.
“Ofgem is considering changes to tariffs that seem intended to bolster the surviving larger suppliers, and to ensure that they get enough money out of customers to cover crisis losses partly through reducing the escape routes available to households.
“Make no mistake, a lot of pain is coming for consumers when energy bills rise from April.
“It brings into stark contrast how inadequate current support for the most vulnerable households is, making it critical that more is done to support those who need it most.”
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