Pressure is mounting on energy suppliers in the UK to cut their prices after it has been revealed that some 70% of all customers who are signed up to standard tariffs have been overpaying for their energy by £300 every year.
Standard tariffs from energy suppliers have long been the bane of watchdogs and commentators since they almost without fail end up being disproportionately expensive.
Current estimates put the proportion of households on so-called standard tariffs at around 70%, and this is made up of people who either haven’t bothered to shop around for better deals or whose introductory or fixed term fixed rate deal has ended, resulting in them being automatically placed on a standard tariff.
Martin Lewis, founder of financial advice site MoneySavingExpert said bluntly of customers on standard tariffs: “you’re being ripped off.”
He went on to directly target E.ON, who recently became the first of the Big Six providers to cut their prices but, with the cut amounting to just 5%,many are seeing it as little more than a token gesture. This is particularly the case when we consider that at the same time, E.ON released a brand new dual fuel tariff for new customers with a price of £769 a year. As Martin Lewis pointed out, “even after this cut, E.ON customers on standard tariffs will be paying around £1,050 a year.”
So despite E.ON making these cuts, the majority of their customers on standard rates, many of whom are likely to have been with the provider for a long time, are paying almost £300 more than a new customer signing up to the new dual fuel deal would be.
Mr Lewis implored customers who are on these expensive standard tariffs to switch immediately, given that “they’d have to cut [the price] by 25% before they were the same price as the cheapest deals.”
Now energy providers to not force customers to stay on standard tariffs, they are always welcome to switch; the issue is simply that they are the basic tariff given to any customer who does not actively seek out better deals and they are, by any measurement, a rip off. Energy providers have been accused of taking advantage of people who are not clued up enough to seek out the best deals and switch by bumping up the prices for these kinds of customer.
Mark Todd from energyhelpline said, echoing Martin Lewis’ bluntness: “the truth is that UK standard energy tariffs are crazily expensive. Suppliers could be doing much more for their loyal customers. The price cuts are miniscule compared to the huge falls in wholesale gas and electricity prices. Suppliers are not passing on even half of the savings they appear to be making.”
E.ON’s chief executive defended the size of the cuts made compared to the drop in wholesale costs, saying: “Once you’ve built in various uncertainties and other factors, while the wholesale market movements may translate across to a dual fuel domestic bill for a drop in prices of under 10%, the inclusion of those other factors translates the percentage to the standard gas cut announced today.”