Citizens Advice calls for suppliers to be set annual targets to get consumers off default tariffs by 2020
New analysis reveals energy bills have risen by 3 times the rate of inflation in the last year
Citizens Advice is today calling for energy suppliers to be set annual targets for getting their customers off expensive default tariffs over the next three years - in addition to an immediate cap on energy bills for the poorest households.
New analysis from the national charity also finds the average dual fuel energy bill for customers on the largest six energy firms’ standard variable tariffs has risen by £89 over the last year.
Standard variable tariffs (SVTs) are the most common form of default tariff for consumers - meaning they pay for their gas and electricity without having a fixed term deal with their provider.
As many as 12 million people in Great Britain are on SVTs, often being automatically rolled onto them by their supplier when a fixed deal comes to an end. SVTs can be hundreds of pounds more expensive than fixed deals and are subject to regular changes in price.
Over the last year all of the six largest energy firms raised the prices of their SVTs. Citizens Advice has calculated that energy prices have risen on average at a rate of 8.3% in the last year for SVT customers of the largest firms - three times the rate of inflation, which is currently 2.6%.
Separate analysis from the national charity also finds it is often poorer pensioners and disabled people, and low income families, who are worst affected by these price rises, spending a much greater proportion of their income on gas and electricity - 11.1% compared to 5.2% among other households.
Citizens Advice has calculated that if price rises were to continue at the same rate as they have over the last year consumers would end up being £185 worse off over the two years to September 2018.
Victoria MacGregor, Director of Energy at Citizens Advice, said:
“Gas and electricity bills have skyrocketed for loyal customers over the last year.
“One large energy supplier after another has hiked up the prices of already expensive default tariffs - putting huge additional pressure on people who are struggling to meet everyday costs.
“It is the poorest pensioners and families on standard variable tariffs who can least afford these price rises - and they continue to lose out whilst debate about how to cap costs continues.
“In the first instance Ofgem must limit rising bills for the poorest energy customers by capping costs for all those eligible for the Warm Home Discount.
“But energy firms can’t be let off the hook from helping all loyal customers. Suppliers should be set annual targets for getting their customers off default tariffs, backed up with a hard deadline, so that by 2020 anyone who has been on the same rolling tariff for 3 years would be protected by the cap too.”
Energy supplier E.ON last month (21 September) announced that it will replace its SVT with a rolling, one-year fixed term default tariff - a move Citizens Advice said was a “positive sign” whilst warning it must not become “a situation of one bad deal replacing another”.
Notes to editors
- Citizens Advice compared SVT dual fuel bills for a medium energy use household for each of the six largest energy suppliers, paying by monthly direct debit, between September 2016 and September 2017. This shows that the average SVT among the largest six energy firms rose by £89, an increase of 8.3%. An 8.3% increase continued over the next year would add another £96 to consumer bills, totalling £185 between September 2016 and September 2018.
- The average SVT price rise was compared to the Office of Budget Responsibility's forecast of inflation between Q3 2016 and Q3 2017 (published in March 2017), 2.6%
- Citizens Advice compared average energy spending as a proportion of disposable income among vulnerable households and those that are not vulnerable, using the 2015/16 Living Costs and Food Survey. Vulnerable households were defined as households of low-income pensioners (in the bottom two deciles of the income distribution), low income working-age families with children under-five (in the bottom three deciles of the income distribution), and low income working-age families in receipt of disability benefits (again in the bottom three deciles of the income distribution).
- The 12 million estimate of the number of households on the SVT is from a speech Dermot Nolan, CEO of Ofgem, gave on 21 September 2017.
- The Citizens Advice service comprises a network of local Citizens Advice, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
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- To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk
- You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.
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