Energy rates to fall in October but questions need to be answered, says Uswitch
Richard Neudegg, director of regulation at Uswitch.com, comments: “Falling energy prices are a relief as we enter the colder months, but the drop could be short lived as Ofgem will review the cap again before the depths of winter.
“Rates for the average home will be 7% lower from October to December, but energy prices remain volatile and are predicted to rise again in January.
“Despite lower unit rates, energy use will be higher, so the average household may only save around £47 next quarter compared to current rates[1]. When we also consider that there is no universal Government bill support this winter, the average household will actually be paying more than they were over the same period last year[2].
“We’ve landed in an environment in which we are expected to simply accept expensive energy costs.
“There are questions that Ofgem and the Government need to answer on whether the current regulatory rules are the best way forward to bring back cheaper energy for households.
“Ofgem’s ban on acquisition-only tariffs was originally implemented to freeze discounting during the peak of the energy crisis, but now means that suppliers have no incentive to offer the best pricing possible.
“The price cap itself also deters suppliers from innovating and delivering better deals. It needs reforming in a way that offers protection for households while putting real pressure on suppliers to do better. Half of the population isn’t even sure what the price cap is or does[3].
“Instead of regulating the exact price of energy every three months and banning cheaper deals, we should set the principle we want to achieve in regulation - that a standard tariff is priced fairly, based on costs.
“This could require all suppliers to offer a transparent standard tariff that provides value for money to households, but also gives them the ability and incentive to do things better. Targeted support should also be available to the most vulnerable.
“For consumers who would like more price certainty over the winter months, there is still an opportunity to lock in a reasonably priced fixed deal before rates potentially rise again.”
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Uswitch.com offers expert advice for consumers following the energy price cap update:
Should I switch to a fixed deal?
“If you want to know what you’ll pay for a year, and don't want to risk higher prices in future, a fixed deal could be a good option for you.
“The deals currently on the market may look slightly more expensive when compared with the new October price cap, but a 12-month fixed tariff secures your rates and will mean you can avoid the uncertainty of the rates changing four times a year on a Standard Variable Tariff, especially with predictions suggesting rates could rise again in January.
“The energy market remains volatile, so it's impossible to tell whether choosing a fixed tariff or staying on the price-capped Standard Variable Tariff will be cheaper in the long run.”
Will I see instant savings now the price cap has dropped?
“If paying by direct debit, you might not notice the difference straight away as energy suppliers will need to recalculate your spend before adjusting your monthly payments to reflect the price cap rates.
“It's also worth noting that most households will turn the heating on from October, so your usage will be higher and therefore you could spend more on energy.
“Without the £400 energy bill support we had last year to help households through winter, many customers will find they’ll be paying more than they were last year.”
ENDS
Notes to editors
The average household with typical consumption will pay £47 less in October to December 2023, when compared to Q3 (Jul to Sep 2023) price cap rates. This is based on average consumption over the period of October to December using current TDCVs.
The average household with typical consumption will pay £14 more in October to December 2023, when compared to Q4 (Oct to Dec 2022) EPG rates, including the Government Energy Bill Support of £66 per month. This is based on average consumption over the period of October to December using current TDCVs.
Earlier this month, Uswitch and Opinium surveyed 2,000 energy bill payers in the UK to understand their views on the price cap. Over half of energy consumers were unaware of what the price cap does, while over two thirds did not realise that their prices can change every three months. This will come as a shock for many - particularly now that the Energy Price Guarantee is no longer in place.
On 30 March 2023, as part of its Powering Up Britain paper, the Government committed to consulting on the future of the price cap on default tariffs in summer 2023.
About Uswitch
Uswitch is one of the UK’s top comparison websites for home services switching, including energy, broadband and mobiles.
More people go to Uswitch to switch their energy, broadband and mobile than any other site, and we have saved consumers over £2.7 billion off their bills since we launched in September 2000.
Free mobile app Utrack also helps households manage their home energy usage and make potential savings.
Uswitch is part of RVU, a group of online brands with a mission to empower consumers to make more confident home services, insurance and financial decisions.