Originally Posted by The Thinker
Here it is:
Why cheap energy is an April Fool
Fuel bills will rise a total of £1.7 billion on Monday, turning more than 11 million customers into April Fools.
Theresa May promised that the government’s energy price cap, introduced on January 1, would “cut bills for millions of families”. But after just three months, the cap is being raised £117 — 10 per cent — for the average household and all six of the leading suppliers are raising their prices right up to the limit.
The increased cap, applied to dual-fuel direct-debit customers on suppliers’ most expensive tariffs, will mean that average bills of £1,137 a year will go up to £1,254 to allow energy companies to “cope with wholesale costs”.
Cornwall Insight, a researcher, says that wholesale electricity has fallen 19 per cent since January while gas has fallen 25 per cent.
The cap was supposed to protect customers of the Big Six energy companies — British Gas, EDF, Eon, Npower, Scottish Power and SSE — whose fixed-rate deals have ended, leaving them on their supplier’s standard variable rate (SVR). In fact, it served to increase prices. The Big Six, which supply 21 million of the UK’s 27 million homes, raised their SVRs in 2018 to maximise profits, knowing that a cap was on the way. In January they all had to lower them to within the £1,137 limit and on Monday, all six will raise them again to the maximum allowed under the new cap.
Joe Malinowski of The Energy Shop comparison site, says: “The price cap will not protect you. It could cost you a lot more than expected.”
By how much will my bill rise?
Some 11 million people are paying the SVR of one of the Big Six suppliers, more than half of British households.
The Energy Shop looked at those companies’ most expensive dual-fuel tariffs on October 1 last year and compared them with what they will rise to on Monday. With the exception of Scottish Power, all the prices will be higher, at £1,254, despite the fact that they were forced to reduce them.
In October British Gas’s bill for average consumption on its SVR was £1,205; EDF Energy’s was £1,228; E.ON’s £1,208; Npower’s £1,230 and SSE’s £1,196. The average rise is £33. Scottish Power’s average SVR bill has fallen slightly from £1,257 to £1,254.
The Big Six say that their costs are rising with increasing wholesale costs, and they need to put prices up.
Mind the tariff gap
It has never been more important to get a good fixed-rate deal. Compare the Market, a comparison site, says that nearly 300,000 customers will slide onto more costly SVRs between April and June as 235 fixed tariff deals come to an end. Since the price cap was introduced, the gap between the most expensive SVRs and the best fixed-rate deals has grown. Cornwall Insight says it was £67 in January, but it will be £187 on Monday.
Who should I switch to?
Check the best-buy tables on comparison websites such as Money Supermarket, Compare the Market and Confused.com, but be aware that some suppliers are more reliable than others, so be careful which you choose. You do not want to end up like the 17,000 customers of Brilliant Energy who suffered large price rises when they were shunted onto SSE this year after their supplier went into administration. Brilliant was the 13th company to go bust since January last year and Ofgem has promised to make it more difficult for unsuitable companies to enter the market. Check customer service and satisfaction reports by Uswitch, a price comparison site, and Which?, a consumer group. Many small companies have poor customer service and offer unsustainably cheap deals to lure customers in only to then raise their prices.
Others, such as Pure Planet, which is backed by BP, the oil giant, have a lot to offer. Steven Day, its co-founder, says: “All small suppliers that offer better value have been unjustly tarred with the same brush, that small size equals risk.” Outfox the Market, a green energy supplier that offers 100 per cent wind electricity, has an average tariff of £892 a year for dual fuel on a variable rate (which can increase at any time), while Money Supermarket recommends a deal from Shell Energy, another green supplier, fixed at £970 to July 2020.
British Gas has a fixed rate of £1,020 to March next year, which includes boiler cover, while Green Network has a two-year fixed deal with an average bill of £1,009.
Pure Planet has a variable-rate deal with an average bill of £986 and Bulb, another green energy supplier, has a variable rate at about £1,000.
Other goods and services that are on the up
The rise in energy bills is not the only thing hitting our pockets this year. Consumers are facing a collective rise of £4.5 billion in some of our most frequently bought goods and services.
■ On March 25
First-class stamps went up from 67p to 70p and second-class stamps from 58p to 61p.
■ On April 1
The average household water bill will rise by £8 (2 per cent) to £415. The cost of a prescription will rise 20p (2.2 per cent) to £9. NHS charges for a dental check-up will rise by £1.10 (5 per cent), from £21.60 to £22.70. The annual TV licence is going up £4 (2.6 per cent) from £150.50 to £154.50.
■ On April 6
Council tax bills will rise an average of 4.7 per cent with the levy on an average Band D house rising £78 to £1,750.