Electricity tariffs: Fixed vs Standard Variable Tariffs
Home energy-saving assistant Loop has revealed UK homeowners on pricey default tariffs could collectively be wasting over £1bn[i] every year on their energy bills.
Around 11million[ii] customers are currently on Standard Variable Tariffs (SVTs) in the UK, which are typically significantly more expensive than the cheapest Fixed Price Tariffs available.
Analysing prices from some of the UKs largest energy suppliers including E.ON, SSE and EDF Energy, Loop compared the estimated yearly bill for SVTs with fixed tariffs.
Loop’s investigation focussed on a selection of the largest suppliers available to customers across the UK, but households could benefit from even bigger savings by shopping around to look for the cheapest deal.
Loop’s investigation revealed dual fuel customers on an SVT paid an average increase of £121 MORE[iii] than those on a fixed price tariff, electric-only customers on an SVT paid an EXTRA £64[iv] on average, compared to those on a fixed rate.
At the time of the investigation, the most expensive estimated annual bills for a dual fuel SVT came in at £1,127 with N.Power, E.ON and Shell Energy, an eye-opening 25% (£227) more than the estimated bill for the cheapest Fixed Tariff deal with Octopus at £900.
Loop is warning that even those who have switched but fail to review their tariff at the end of the fixed term could be paying over £200 MORE for their bill than if they were on the cheapest available deal with the same company,[v] as they are rolled onto expensive default tariffs, despite remaining with the same supplier.
Put simply, Brits are paying more than they need to for the exact same product.
It’s no secret that customers are paying above the odds for SVTs and to protect consumers, Ofgem enforced a price cap in January 2019. But despite the cap, householders could still be paying hundreds more than they need to.
Despite the growing awareness of the savings available when opting for fixed tariffs, recent figures from Ofgem revealed just a quarter of customers switched supplier in 2019 (24%). And just 18% switched to a new tariff[vi]. The regulator also revealed almost half (49%) of customers have NEVER switched, or have only switched once[vii]3.
To understand more about the reasons why people avoid switching tariffs, Loop recently conducted a consumer survey[viii] which found that a quarter of people (25%) don’t switch supplier as they’re happy with their bills as they are. This figure rose to over a third (35%) for those aged over 65.
Perhaps surprisingly, more than one in ten (13%) people admitted they “couldn’t be bothered” to switch, and a quarter (25%) aren’t aware of the financial savings available to them.
But many are unaware that there are deals to be had. More than one in ten (13%) of those that have never switched said they trust their supplier to always give them the best deal, but Loop’s research revealed they could be paying hundreds more for their bill than if they were on the cheapest available deal with the same company[ix]. 13% of people said they don’t understand the options available to them, or feel anxious or stressed at the thought of going through the process.
With quick and easy tariff switching built into the app, an energy-saving assistant like Loop lets you choose the tariff that’s right for you, based on the actual energy you use and guides you through the process, step-by-step, in less than ten minutes.
Steve Buckley, Head of Data Science at Loop, said:
“Too many customers are being exploited by energy companies after they roll over onto default tariffs, so checking you’re on the best available deal is vital for keeping costs low. It doesn’t matter whether you rent or own your home, every customer is entitled to switch their energy supplier and by ensuring you aren’t on an Standard Variable Tariff, you won’t be paying more for your energy than you need to.”
“It’s clear from our research that many consumers are placing too much trust in their suppliers, but energy companies have no responsibility to ensure customers are on the best deal. If you haven’t switched supplier or tariff for over a year, there’s a strong chance you could be on a pricey standard variable tariff, so use an energy-saving assistant like Loop or compare deals to find a cheaper option in vital.”
“So many people don’t know where to start when it comes to cutting costs and It can often feel overwhelming when people are already leading busy lives, but it doesn’t need to be confusing. In reality, the process of switching is now quicker and simpler than ever and you could save hundreds on your bills.”
[i] Average saving for dual fuel and electric tariffs (£93 x number of customers on default tariffs (11million)
[ii] Data from Ofgem – https://www.ofgem.gov.uk/publications-and-updates/energy-price-cap-will-give-11-million-fairer-deal-1-january
[iii] Average estimated price increase for dual fuel customers who are on SVTs.
[iv] Average estimated price increase for electricity customers who are on SVTs.
[v] The annual estimated bill for Octupus’ fixed tariff was £900, £227 cheaper cheaper than the estimated yearly bill the highest-priced SVT (£1,127).
[vi] Data from Ofgem State of the Energy Market 2019 https://www.ofgem.gov.uk/system/files/docs/2019/11/20191030_state_of_energy_market_revised.pdf
[vii] Data from Ofgem State of the Energy Market 2019 https://www.ofgem.gov.uk/system/files/docs/2019/11/20191030_state_of_energy_market_revised.pdf
[viii] Consumer survey conducted by 4Media and surveyed 2,002 adults living in the UK.
[ix] The annual estimated bill for Octupus’ fixed tariff was £900, £227 cheaper cheaper than the estimated yearly bill the highest-priced SVT (£1,127).