Big energy providers ‘bunching prices just below price cap’
Major energy providers are bunching their charges just below the new price cap, analysis suggests.
Ofgem set a price cap of £1,137 per year for a typical dual fuel customer paying by direct debit, which came into force on January 1.
The cap was introduced to give price protection for 11 million customers on poor value default tariffs, Ofgem said.
Research by renewable energy provider Bulb suggests the Big Six providers – British Gas, EDF Energy, E.ON, Npower, Scottish Power and SSE – have bunched their standard variable tariffs just £4 below the price cap.
It found the the average standard variable rate from these providers stands at £1,133.
The research also found only a £2 difference between the cheapest and most expensive Big Six standard variable tariffs.
Hayden Wood, co-founder and chief executive of Bulb, said: “The price cap, which Bulb supports, was meant to be a maximum and not a target.”
An Ofgem spokesman said: “The price cap protects consumers on default deals from being overcharged for having gas and electricity supplied to their home and ensures they always pay a fair price.
“We have designed the price cap so that suppliers are still able to offer tariffs priced below the level of the cap.
“Consumers on default deals who want to save even more money can shop around, including by asking their supplier if they are on the cheapest tariff and by using price comparison sites, to make savings on their energy bills.”
Lawrence Slade, chief executive of Energy UK, said: “We have previously warned of the unintended consequences of price caps, including the risk that prices can often converge around the level set.
“The price cap presents a significant challenge for many suppliers in the retail market in what is evidently a difficult climate, with a number of providers exiting the market in recent months.
“Suppliers are already facing steeply rising costs, the vast majority of which are out of their direct control, including wholesale costs which have increased by well in excess of 30% in the last year.”
He continued: “We must continue to encourage more customers to engage and benefit from the large savings that can be made by switching.”