With the looming threat of rising energy prices this April, many billpayers may be looking for alternative providers in a bid to save money.
Fortunately, experts have issued advice showing that millions of households could switch their energy supplier just in time to save some cash on their annual bill. In April, the Energy Price Guarantee which caps the highest average a household could pay on their bills will rise to £3,000, however, this will likely be accompanied by decreasing wholesale prices based on current trends.
Experts at Cornwall Insight highlighted that this could give suppliers the opportunity to provide fixed tariffs that will compete with the government cap. However, it warns that this will be subject to the state of the wholesale market which can be incredibly volatile.
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Kate Mulvany, Senior Consultant at Cornwall Insight 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."
Cornwall Insight also notes that Ofgem's Market Stabilisation Charge (MSC) could impact the decisions made by suppliers. If a supplier purchases energy in advance and the wholesale price falls unexpectedly, they may not be able to lower their prices and that could cause customers to switch to rival suppliers.
The introduction of the MSC means that if wholesale energy prices drop by more than 10 per cent from when the current price cap was set, then a supplier that gains a customer would have to pay the original supplier in line with the charge. This could limit the incentive for suppliers to provide competitive switch tariffs.
Ms Mulvany adds: "There are many variables still in play, and it is difficult to know how fast and how far energy bills will fall. The Market Stabilisation charge adds another level of complexity, as while it may safeguard against supplier collapse it is likely to drive up the cost of energy deals offered by suppliers.
“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.”
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