Energy switching at record low but bills expected to increase by 50%

Energy switching at record low but bills expected to increase by 50% 2
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Energy switching numbers are at a record low as households are still being advised to stick with their current tariffs to avoid significant price hikes.

Only 139,070 customers changed supplier in November, according to Energy UK’s latest electricity switching figures, the lowest monthly figure since it started publishing the data in October 2013.

It also represents a 70 per cent fall when compared to November 2020 – highlighting the impact of the energy crisis. 

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It comes at a time when energy bills are at a record high and are expected to soar even further in the New Year with experts suggesting the energy price cap might increase by more than 50 per cent from April.

Switching numbers are at a record low as customers are told to stick with their current tariffs

Switching numbers are at a record low as customers are told to stick with their current tariffs

The crisis was sparked in August this year after wholesale prices soared to record levels.

This meant suppliers had to pay more for gas with the increased costs then passed on to consumers.

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Many providers have gone bust as a result of not having bought enough supply before prices soared and as they have been unable to charge more than an average £1,277 for their default tariff customers due to the price cap put in place by Ofgem. 

The cap will be reviewed again in April next year with many claiming it could increase by as much as £600 – sending bills rocketing for millions of homes.

However, at present, most are being advised to stick to a default tariff if their fixed contract comes to an end as these are the best deals available.

New fixed deals are seeing some households being quoted over £2,000 a year, removing any financial incentive to switch as customers are advised to stay on default tariffs in the absence of better offers elsewhere.

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As a result, switching has been reduced dramatically, with almost 4.9million customers changing supplier so far this year, an 11 per cent decrease compared to the equivalent period in 2020.

The continuing fall – after a 27 per cent dip in October – had been expected given the current turbulence in the retail market.

The figures do not include customers transferred as part of the Supplier of Last Resort (SOLR) process, activated when a supplier goes out of business. 

Several suppliers are calling on the Government to intervene to stop the rising costs

Several suppliers are calling on the Government to intervene to stop the rising costs

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Today Energy UK are calling on the Government to urgently intervene due to the soaring costs with prices currently sitting at £4.50 a therm. 

Matthew Cole, of Energy UK’s switch guarantee, said: ‘This steep fall is very much as expected given the current situation in the retail market.

‘There’s no financial reason for customers to switch away from default tariffs and this is likely to remain the case in the near future.

‘Once we are through the current upheaval, the retail market is going to look very different to how it did earlier in the year.

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‘However, there will still be an important role for switching between suppliers, and between the tariffs an individual supplier offers– albeit, in a market where price is no longer the only consideration and other factors like service quality and innovative new, tailored, products attract customers.’

Ofgem has said that suppliers can start recouping the cost of energy through their customers

Ofgem has said that suppliers can start recouping the cost of energy through their customers

Suppliers to recoup charges through customers 

It comes at the same time Ofgem revealed that suppliers that took on the customers of their failed rivals will be able to claim back more than £1.8billion by adding it to the bills of households and businesses.

The regulator said it had approved payments to eight different suppliers of last resort, which stepped in to ensure the lights stayed on for close to 2.2million households and businesses.

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By far the biggest payment was made to Octopus Energy, which had also taken on the highest number of new customers.

Octopus claimed £681million after taking over failed supplier Avro Energy’s customers.

The second biggest claims were made by Shell Energy and British Gas, which picked up more than half a million customers each amid a slew of recent supplier failures.

When a supplier collapses, energy regulator Ofgem asks for a volunteer to take responsibility to keep gas and electricity flowing to customers of the failed company.

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However, this can be an expensive process and the new supplier will often need to bring in new staff to move accounts across and will have to place an advance order for the gas and electricity the customers will use over the coming months.

To encourage volunteers to come forward, Ofgem allows them to claim back costs that they rack up when taking on these new customers.

Each claim is limited to what Ofgem considers a reasonable cost.

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An Ofgem spokesperson said: ‘Ofgem’s safety net has protected more than four million customers through the unprecedented global gas prices this year, making sure they have an energy supplier and household credit balances are honoured.

‘This comes at a cost, which we always seek to minimise. As we announced last week, we’re also stabilising the retail market with robust stress tests for all suppliers.’

The money will ultimately fall on bill payers across the country with each household and business charged a portion of the £1.8billion.

The regulator could add this onto bills from the beginning of April next year, adding to the already soaring energy prices which caused the suppliers to fail in the first place.

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