Energy suppliers could soon be offering fixed prices costing between £2,200 and £2,500, based on current wholesale costs. That is according to analysis from comparison service Uswitch.
The Government is expected to confirm within the Budget that the Energy Price Guarantee will remain at £2,500 on April 1. It was originally thought it could increase to £3,000.
Uswitch's analysis suggests suppliers could offer tariffs that beat those prices with fixed deals. This is because the wholesale cost has fallen by 60% since December 1..
The analysis is based on a range of factors including wholesale costs, predicted operating costs of various suppliers and the Market Stabilisation Charge (MSC), among others. The MSC was introduced by Ofgem in April 2022.
It was designed to protect energy suppliers at a time of rocketing wholesale prices. In many cases, it means that suppliers gaining an energy customer are required to pay a charge to the provider who is losing a customer.
Analysis by Uswitch shows that - at a time when wholesale costs are falling - the MSC is a potential barrier to providers being able to offer even lower-priced fixed deals. Bill-payers are clamouring for more price certainty and a return to finally having choices, with seven in ten households (70%) saying that customers should at least have the option of a fixed tariff available now.
Three in five households (61%) would be willing to sign up to a fixed deal right now, though the majority (58%) would only do so if it was the same price or lower than they are currently paying. Currently, only an estimated four million households are on fixed deals, compared to 27 million on SVTs.
The proportion on fixed deals has fallen by more than half from 41% energy bill-payers in October 2021 to 13% now. Reducing energy bills is the most common reason why people would choose a fixed deal, with over half (56%) of households saying this would encourage them to fix.
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A third (33%) said having more stability in their bills would encourage them to move suppliers, while a quarter (24%) believe a fixed deal would help with household budgeting. One in seven (14%) want a fixed deal so they can move away from a supplier they are unhappy with.
One in three (32%) would switch to another supplier’s fixed deal to get either better customer service, more accurate bills, or for benefits like online services and money-back schemes. However, many consumers fear there is little prospect of fixed deals becoming available, with two-fifths (40%) saying they do not think there will be any to sign up to in the near future.
Despite this, a quarter (24%) would like to move to a fixed deal between now and the next few months and a further 14% hope to move onto one later this year. Nine in ten consumers (90%) believe more should be done to help consumers benefit from falling wholesale costs. Nearly four-fifths (78%) say suppliers should be doing more, half (51%) say the Government should act, while two-fifths (41%) believe it is Ofgem’s responsibility.
Uswitch is calling on energy suppliers to start bringing fixed deals back to the market as soon as possible to give consumers more choice and certainty, given the falling wholesale prices. Richard Neudegg, director of regulation at Uswitch.com, said: “We see no good reason why suppliers can’t begin to act on lower wholesale prices and offer fixed deal options to energy customers as soon as possible.
“Households have been witness to a rollercoaster of price rises and uncertainty over the last couple of years, while relying heavily on temporary measures such as the Energy Price Guarantee in order for costs not to spiral further. And although energy costs remain historically high, bill-payers deserve the freedom to choose a fixed deal if they feel it is their best option.
“For many energy customers, it is not just about the money. Many are stuck with their supplier and lack the ability to vote with their feet and move to one offering other benefits such as better customer service.
“With current price cap predictions for July at £2,153, households will need to think carefully before committing to a fixed deal in the coming months. Some may want to lock in the certainty of a lower price sooner, ahead of next winter, and others may wait to see what happens to the market. Energy suppliers should ensure that consumers can reap the benefits of a lower wholesale market by bringing back fixed deals now.”
