It may soon be worthwhile to shop around for a better energy deal again. That's because experts say energy suppliers could start offering fixed-term deals cheaper than the government's energy price guarantee, which is set to rise again in April, by this summer.
Nearly half a million customers were switching energy suppliers every month back in 2019 as they looked for a better deal. But that figure plummeted as prices surged during the energy crisis, with just 85,000 households switching each month last year.
Now, energy consultancy Cornwall Insight thinks the number of customers switching suppliers could skyrocket from the start of July. This would bring some normality back to the energy market after soaring bills had made it virtually pointless to switch - because no suppliers could offer a fixed-term deal that was significantly cheaper than the price cap.
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Since October, the government has been helping people with their bills through its energy price guarantee, which reduces the average household bill, based on typical usage, to £2,500 a year. Without it, bills would have likely tracked the Ofgem energy price cap up to more than £4,000 a year for the average household.
However, this support will become less generous from the start of April, when the average bill will rise to around £3,000. As a result, the price of energy has been tipped to fall below that level from the start of July.
Cornwall Insight senior consultant Kate Mulvany said: "The energy market is complex, making it difficult to predict the effects of policy changes on consumer behaviour and energy pricing. However, if suppliers’ costs decrease and government-supported rates remain relatively high, it is likely we will see a significant revival in reasonably priced energy plans, with millions of households finally able to take advantage of the savings they have been missing out on for years.
"There are many variables still in play, and it is difficult to know how fast and how far energy bills will fall. To see rising switching we are also relying on consumers engaging with an energy market, which many are understandably wary of. It is possible some households may choose to stick with what they know instead of choosing cheaper options."
Uswitch.com director of regulation Richard Neudegg added: "The return of fixed deals to the energy market would finally give consumers the freedom of choice over their supplier with an option to lock in more certainty on pricing. With wholesale prices stabilising, though still high compared to past years, there is an opportunity for suppliers to start offering more competitive rates."
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