Central government threats of increased regulations, higher wholesale costs, as well as price caps are causing big changes in the energy tariff market. Some power companies are now changing the rates on their cheapest deals, and some energy suppliers are increasing the cost of electricity by over 20%. They are doing this in an effort to protect corporate profits if in fact the government were to ever cap household energy bills.
Since October of 2016, the “big six” are leading the price increases. Each of these suppliers are no longer necessarily matching the cheapest tariffs of their competitor and they are not being as aggressive in setting the lowest prices. As a result of these changes there are millions of households across the UK that are being threatened with over 20% increases on their electricity bills.
Adjustments that have occurred to tariffs since October 2016
There are providers, such as Uswitch, that examine the cost of various energy suppliers. One thing they do is compile the average cost. Since October 2016, the average of the cheapest tariffs has increased 20% to over £1,000.
Now there may be more than one factor that contributes to this increase. It ranges from government policies to increasing wholesale prices for natural gas as well as solar/wind/sun power. The fact is that if wholesale prices increase, companies such as EDF Energy as well as British Gas need to pass costs on to their customers in the form of higher monthly bills. So there is no way getting around that. And since October the wholesale cost of gas has increased by 16 per cent.
Another factor leading to higher bills are the costs of installing smart meters, as that expense also is passed on the customers. If and when one of the big 6 suppliers installs a meter in the home of a family (no matter their household income) that is a corporate expense. And this meter scheme (which is a result of central government policies) is also passed through.
One additional cause of the increase in cheap tariff rates is the talk of a government price cap. What will happen is that if there is a maximum dollar amount that energy suppliers can charge, then those customers that are currently receiving assistance in the form of cheaper tariffs will need to pay more money. This will also cut down on the amount of financial assistance from energy suppliers. As the big 6 will no longer be able to subsidize the discounts given to families on a low income.
Customers still have many suppliers to choose from. Npower, British Gas, and other major suppliers have increased rates over 20 per cent. However there are still smaller, independent energy providers in the market place such as Octopus. When factoring in all the the competition, the average of the cheapest tariffs is £891.08 according to Uswitch. So that is lower than the £1,000 from the big 6. So it is recommended to always price match.
These increases from the big 6 may lead to increased customer loss. Customers are also fleeing as some experts say the confusing bills sent to customers is leading to over £4 billion in overcharges. Some analysts say that British Gas may lose one million customers this year. So even though rates are going up across the industry, it is still competitive and families have many options available to them.